Commercial Real Estate Valuation Methods - Explained In 2 Minutes
JB
Jeremiah Boucher Founder, Patriot Holdings • Author of Finding Your Edge
Key Takeaways
- The income approach (NOI / Cap Rate) is the primary valuation method for commercial real estate.
- The cost approach (land + replacement cost - depreciation) sets a floor on value — don't overpay relative to replacement.
- The sales comparison approach uses recent comparable sales — useful for context but less reliable for unique properties.
- Valuation is not a science — it's a negotiation starting point based on income, market conditions, and buyer demand.