Whether you’re hoping to accurately evaluate a new commercial property for your small business or seeking the current value of one you already own, establishing commercial property value can be complicated.
When determining commercial property value, you should be prepared to take into account the difference between real property and business personal property.
- Real property is land and the permanent things on it, like buildings, outdoor fixtures, permanent machinery and equipment
- Business personal property is all other property that’s not classified as real property and can be easily moved, such as computers, telephones and office furniture
While you own the asset in both cases, knowing the distinction is important because each type of property is beholden to different tax rules. It also helps you define the assets that are included with the property long-term. Both of those factors affect the value of the overall property.1
Once you have successfully established what falls under real property versus business personal property on your own commercial property, there are still several key factors
that affect the commercial property value:
- Construction costs: The actual costs to build anything on the property
- Market trends: The overall condition of the city, state or national real estate market
- Physical condition: The upkeep of the property and any buildings on it
- Market availability: The number of similar properties available in your local market
The ways in which these four factors will affect your commercial property value are far from set in stone. For example, the availability of similar properties on the market can fluctuate deeply, affecting your own property value in turn. The changeable nature of these factors means that your commercial property value is also subject to change throughout your ownership of it.2
What approach is best for commercial property valuation?
A best practice for commercial property valuation is to utilize multiple of the above methods — or other additional methods — together to define the value of a given property.4 Leveraging multiple methods can help you more accurately take into account the multiple, varying factors that affect your overall property value and even see which of those factors is influencing your property’s value most heavily. You may also simply develop a personal preference for the type of calculation you prefer to do, and the factors you prioritize the most.3
While it is very possible to calculate the value of your small business’s property on your own, you can also work with a local real estate appraiser to verify your property’s value.3
Protecting your commercial property’s value
Understanding the value of your commercial property can help inform the overall value of your small business. Nationwide can help you maintain, or increase, the value of your small business’s commercial property through tools and services designed to protect small businesses. Contact your local agent to learn more about how Nationwide can assist with your commercial property needs.