Selling a commercial unit: to an end user or as an investment property

Two types of buyer, two valuations

An owner-occupier assesses a commercial unit primarily on its location, layout flexibility and immediate usability. An investor calculates the gross and net initial yields based on the current or market rent and the remaining term of any lease.

Selling with or without a tenant

• Vacant unit: attractive to owner-occupiers, with the sale price based on comparable transactions.
• Tenanted unit with a long lease term: attractive to investors, valued using gross initial yield/net initial yield.
• Tenanted unit with a short remaining lease term: lower valuation due to the risk of vacancy when the tenancy changes.

Commercial complexes divided into separate ownership units

Many commercial units form part of a complex divided into separate ownership units with an owners' association. Always request the deed of division, the latest annual accounts, the long-term maintenance plan and the balance of the reserve fund before setting the asking price.

Valuation in practice

Compare recent sales of similar units in the same complex or business park, adjusted for floor area, condition and any rental income. Indicatively, gross initial yields for marketable, tenanted commercial units range from 6.5% to 8.0%.

Preparing for sale

1. Ensure there is an up-to-date energy performance certificate and a measurement report compliant with NEN 2580.
2. Document permits and permitted use under the environmental plan.
3. Make any leases and indexation arrangements clear to buyers.
4. Have minor defects repaired; major alterations rarely pay for themselves.