Commercial Real Estate Appraisals – Commercial Appraiser

Of the three principal methods for appraising property-cost, sales comparison, and income capitalization-it is the latter that is principally used for commercial property such as shopping centers, industrial sites, large apartment complexes, and office buildings. The reason for this is rather straightforward: the primary purpose for acquiring such an asset that is not owner occupied is to generate income. It is the commercial real estate appraiser who will examine the property’s ability to provide a positive annual return on invested capital. It takes into consideration the rent that a property can be expected to earn, the market value of the land or site, and the resale value when the property is sold. The commercial real estate appraiser will always seek to determine the highest and best use of the property, and then value can be determined.

More specifically, the methods of direct capitalization and yield capitalization will be employed by New Jersey appraisers. The former is widely used when income is not expected to vary significantly over time. For example, direct capitalization would be used in commercial real estate appraisals to value an apartment building in which the leases are not expected to rise greatly year over year. The net operating income (NOI) is derived from a single year’s net income or an average of several years which is then divided by a capitalization rate to derive value. On the other hand, yield capitalization views properties as long-term holdings, thus the income stream needs to be assessed by New Jersey appraisers for a period of years. One needs to take into account factors such as inflation, the rise in rents due to future capital expenditures like renovations, or unexpected increases in maintenance and repair costs. A current value of the return for the anticipated holding period of the property is what is determined.

Since 1990, RD Clifford Associates has been a leader in commercial real estate appraisals in New York, New Jersey, and Pennsylvania. We are experienced in valuing commercial properties of all sizes and for all purposes. You can rely upon our detailed reports to provide you with all relevant information and an accurate valuation.



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