According to an article by Finance Lobby, commercial real estate (CRE) sales in Houston reduced by 74% in the first half of 2023 in contrast to the same period in 2022. Despite this, the growing Houston population and robust economy mean the demand for CRE may stabilize and rise.
If you want to buy or rent in Houston, getting a commercial property valuation is important. The benefits of this process include:
- Informed investment decision
- Risk control
- Strategic portfolio management
- Optimized financing
Here are the steps you should follow for accurate property valuation.
1. Do a Detailed Property Assessment
A property's value may vary based on the location and amenities. Do a detailed analysis of the building's physical condition to determine how much it is worth.
Are there any sections that need repair, upgrading, or remodeling? Are all structural components in good condition?
Some commercial property assessment tips to use include:
- Check for building code violations
- Consider future developments
- Review the property's construction history
Taking such steps will ensure you assess the property's value based on its condition and potential.
2. Study the Commercial Real Estate Market
Commercial real estate prices fluctuate based on market demand and interest rates. Doing a market analysis will help you assess the value of properties in various Houston locations.
Study the following CRE market trends and how they affect property value:
- The growing interest in sustainable buildings
- The shift toward hybrid workplaces
- Inflation
- Rising interest rates
Since the COVID-19 pandemic, many CRE buyers are looking for buildings that have wellness amenities. For example, they prefer those with advanced HVAC systems and touchless tech. Such factors influence property values, since buildings with such amenities have higher demand.
Studying these trends will help you assess the direction of your investment in the future. You will know if it's a worthy deal based on how the amenities and macroeconomic factors influence its value.
3. Choose the Best Valuation Method
You can assess the value of real estate property using valuation methods such as:
- Sales Comparison Approach
- Cost Approach
- Income Capitalization Approach
When using the sales approach, you compare the property with the value of similar ones in the area. The income capitalization method focuses on the income-generating potential. On the other hand, the cost approach looks at the cost of replacing the property while factoring in depreciation.
Every method has perks depending on the type of property you want to buy. However, it's better to use the income approach in Houston since there are currently significant vacancy rates. Based on a study by the Federal Reserve Bank of Dallas, the office space vacancy rate was 23.8% in the fourth quarter of 2023.
4. Consider Your Real Estate Goals
Your reason for investing will influence the value you place on a property. If you plan to buy and flip commercial real estate, your view will differ from that of a buyer looking to use the space for their business.
Establish your goals and consult a CRE professional for a customized property valuation.
Get Accurate Commercial Property Valuation
PMI Infinito lets you make a detailed commercial property valuation with our ROI calculator. Besides, we have real estate experts to give you CRE insights and help you manage your tenants. Contact us now for immediate assistance.
