In commercial real estate appraisals, appraisers generally select a minimum of three recently closed sales of properties that closely resemble the subject property in location and key characteristics. They then adjust these comparisons as necessary to reach a credible opinion of value. This process, known as the sales comparison approach, is widely used in appraising properties for leasing or sale. When it comes to commercial leasing—such as for business, retail, or office spaces—appraisal is essential for establishing a fair asset value. For example, in Los Angeles, commercial appraisals provide accurate valuations for urban properties, benefiting property owners and prospective tenants alike.
Key Characteristics of the Sales Comparison Approach
-
Location and Neighborhood:
Location has a significant impact on real estate values. When comparing properties, appraisers focus on homes within the same neighborhood to ensure that location-related variables, like proximity to schools, parks, highways, or other landmarks, align as closely as possible. This helps control for differences that could affect value, such as pollution levels or access to essential amenities. -
Recently Sold Properties:
Recently sold listings serve as a benchmark for property values in a specific area. Although other factors, such as individual property features and market trends, influence sale prices, these listings provide a strong baseline for appraising current property values. -
Features of the Property:
To maintain consistency, the comparison should be limited to properties with similar features—such as the number of bedrooms, bathrooms, garages, and overall square footage. Matching properties based on size and land parcel similarities adds reliability to the appraisal. -
Age and Condition:
Properties of similar age and condition are compared to maintain fairness in value assessment. For instance, two comparable homes may exist in the same neighborhood, but one in need of repairs will be valued lower than a similar, well-maintained home. -
Average Price per Square Foot:
Once comparable properties are identified, appraisers calculate their average sale price per square foot. This is done by dividing each property’s sale price by its square footage. Then, by taking the average cost per square foot, appraisers can estimate a valuation based on the subject property’s size.
Finding a Commercial Real Estate Lease in Los Angeles
To secure a commercial real estate lease in Los Angeles, there are a few important steps:
-
Identify Your Needs:
Begin by determining the type of commercial property required, such as office, retail, or industrial space. Consider factors like size, location, and budget. -
Search on Online Platforms:
Many online platforms specialize in commercial real estate listings, including LoopNet, CoStar, and local Los Angeles real estate agencies. These platforms provide extensive options and are a great starting point. -
Connect with Real Estate Agents:
Engaging a commercial real estate agent who specializes in the Los Angeles market can streamline your search. Agents can guide you toward properties that meet your criteria and arrange property tours. -
Visit Properties:
After shortlisting potential locations, visit each property to assess whether it aligns with your business needs. -
Negotiate Lease Terms:
Negotiations often cover aspects like rent, lease duration, maintenance responsibilities, and business-specific clauses. -
Review Lease Agreement:
Carefully review the terms and conditions of the lease agreement. It may be beneficial to seek legal advice before signing to ensure that all conditions align with your expectations. -
Sign the Lease Contract:
Once both parties agree to the terms, the contract is signed, finalizing the lease arrangement for your business.
Importance of Commercial Real Estate Rent and Sales Comparisons
Sales and rental comparisons are essential for accurately assessing property values, potential rental income, and investment viability. In a major market like Los Angeles, appraisals rely on these comparisons to ensure fair pricing and enable prospective buyers to gauge property value effectively in the urban setting.