Six Things That Set the Price
Net income is where every conversation about selling a commercial property starts. It is also the least interesting number in the room.
When an owner asks what their property is worth, the answer usually arrives as one figure. Net income, capitalised, done.
That number is a fair starting point and a poor stopping point. It tells you what the building earned. It tells you very little about what a buyer will pay for it, because a buyer is not purchasing last year. They are purchasing the next ten.
When we build a strategy for a sale, we work through six variables, and they interact.
One. Net income
The starting point, and the most generic read available on any asset. Necessary, never sufficient. Two buildings with identical net income can be worth materially different amounts, and the reasons are the five variables below.
Two. Location
Corridor, traffic and catchment, but also direction. What is the surrounding area becoming rather than what is it today? A location that is improving and a location that is thinning can look identical on a rent roll and price very differently once a buyer has driven it.
Three. Investment quality
How the income is structured, how durable it is, and what it would take to disturb it. Lease terms, covenant strength, how much of the income depends on any single tenant. Income that would survive a bad year is worth more than income that would not, even where the totals match.
Four. Building quality
What the asset will demand in capital across the hold. Roof, envelope, mechanical. A buyer who is competent will price deferred work into their offer, and they will price it less generously than it would have cost to do properly. Work done in advance is usually recovered. Work left for the buyer is usually discounted twice.
Five. Tenant mix
Whether the tenants complement one another, and whether the mix can be improved. A well-composed mix produces traffic that benefits every tenant in the building, which shows up in renewals. A collection of unrelated tenants who happen to share a parking lot does not.
This is also where upside lives. A mix with an obvious gap is not a weakness in a sale, provided it is presented as what it is.
Six. Replaceability
The one owners think about least and buyers think about most.
If you lose a tenant, whether through a normal expiry or a midnight move, how quickly does that space re-let, and at what rate? A unit that re-lets in sixty days at the same rent is a different asset from one that sits for a year and then takes a discount, even while both are fully occupied on the day of sale.
Replaceability is what turns a rent roll from a record of the past into a forecast.
Where the six meet
These variables are not a checklist to score. They are the frame a serious buyer uses, whether or not they name it, and the reason two buildings with the same income sell for different numbers.
Understanding where an asset sits across all six is also what decides the strategy: what to fix before going to market, what to disclose plainly, what genuinely is upside, and which buyer the property should be shown to.
If you are considering a sale in the next couple of years, the useful time to look at these is now, while four of the six can still be changed.
2 minute check
What would a buyer see in your building?
For owners thinking about selling. A buyer weighs the same few things every time. This reads your building the way they would. It is not a valuation and gives no price.