You Can Set the Asking Price — But You Cannot Set the Market: The Real Value of Professional Commercial Property Advice

What is ‘The Market’ and ‘Value’ of my Building

Property owners understandably have views about the value of their own assets. They may have owned a building for many years, invested heavily in improvements or know that another property nearby apparently achieved an impressive rent or sale price.

These are all perfectly reasonable considerations, but they do not, by themselves, determine market value.

One of the most important — and occasionally difficult — responsibilities of a Commercial Property Valuer or adviser is to distinguish between an owner's expectation of value and the value that the market will realistically support. The two are not always the same.

Professional Commercial Valuation and Market Behaviour

Professional commercial valuation involves considerably more than multiplying the floor area of a building by a price per square foot.

An experienced valuer considers comparable transactions, specification, age, condition, configuration, location, accessibility, site area, planning use, lease terms, tenant covenant, investment yields, competing availability, supply and demand and the wider economic environment.

But perhaps most importantly, experienced property professionals understand how the market is behaving.

They see where negotiations are taking place, where purchasers are becoming cautious, where occupiers are resisting rents and where transactions that initially looked attractive are failing to proceed.

That knowledge is extremely difficult to obtain simply by looking at asking prices online.

An asking price is an aspiration. A completed transaction is evidence.

The distinction is important. Owners may understandably say: “The building next door is being marketed at £15 per square foot.”

The relevant questions are: Has it let? How long has it been available? What incentives are being offered? What was agreed? Is the specification comparable? Are the lease terms the same? This is where experienced valuation advice becomes particularly important.

Good professional advisers should not simply endorse an owner's expectations. Sometimes their responsibility is to challenge them. That should not be interpreted as negativity.

‘Sign Posting’ Value and Marketing

In Commercial Real Estate, Agency Valuers having assessed the answers to the above relevant questions in effect provide ‘Sign Posting Values’. The market then determines the value. 

The Commercial Property Company – such as White Commercial from its decades of experience along the M40  ‘has the market’ and can then determine ‘true value’ following the implementation of an agreed carefully conducted focussed and proactive marketing strategy.

One of White Commercials favourite transactions consisted of a complicated building to value – the Company Owners National Property Advisers valued the property at £275,000. On marketing 75 inspections were conducted in 2 weeks with 14 offers received and a value of £465,000 achieved. The client was delighted!

Overpricing a property can itself destroy value. 

Buildings that remain on the market for too long can lose momentum, become perceived as difficult to let or sell and generate substantial additional holding costs.

Six months' unnecessary vacancy can mean lost rent, empty rates, insurance, service charge expenditure and financing costs — potentially far exceeding the additional rent or sale price originally being pursued.

Equally, professional advice works in the opposite direction. An experienced valuer should be equally prepared to tell an owner when market evidence suggests their property is being undervalued.

Professional valuation is therefore neither about talking a property up nor talking it down.

It is about interpreting the evidence without emotion.

White Commercial Surveyors, Valuation and Agency advice 

Our advice and recommendations are not only informed by comparable evidence but by continual involvement in commercial property negotiations and transactions – ‘The Market’. 

That interaction with owners, occupiers, investors and developers provides an important understanding of where expectations translate into genuine market demand.

The owner can decide the asking price, The adviser can recommend the ‘sign posting’ value, Ultimately the market decides the price.

Recognising that distinction early is often the difference between an ambitious property strategy and a successful one.