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What Determines Commercial Property Value?

What determines commercial property value — and how each factor is weighted differently across asset classes and markets.

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The Core Drivers

Income, location, and
what buyers will pay.

Commercial property value is not one number — it is the intersection of income potential, comparable transactions, replacement cost, and what a specific buyer pool will pay at a specific moment in time. Understanding which factors dominate for your asset class is the starting point for any credible valuation.

Key Value Drivers by Asset Class

What matters most
for your asset.

Industrial Property
Clear height, column spacing, dock/grade loading, power supply (amps), yard size and zoning. Location relative to 400-series highways. Lease quality if tenanted — covenant, term remaining, rent vs market. Cap rate compression has been strongest in this asset class across Ontario and Alberta.
Development Land
Zoning entitlement and density, servicing status (municipal water/sewer vs well/septic), environmental status (Phase I/II), frontage, configuration and site coverage. Proximity to 400-series in Ontario or QEII in Alberta. Approved vs speculative uplift is reflected in price.
Investment Property
Net operating income (NOI) divided by the prevailing cap rate for that asset class and market. Tenant covenant quality, weighted average lease expiry (WALE), and rent-to-market ratio are the critical adjustments. A below-market-rent tenancy can be value-add or a liability depending on term remaining.

The Appraisal vs Broker Opinion Difference

Two different
purposes.

A formal AACI appraisal follows a structured methodology for lending, estate, or legal purposes. A broker opinion of value (BOV) reflects current active buyer sentiment and recent comparable transactions — it is what the market will actually pay today, not a lender's defensible floor.

For owners evaluating a sale, a BOV from an active commercial broker is typically more useful than a formal appraisal in setting list price and understanding achievable range. Lucero Commercial Group provides confidential BOVs as part of the mandate intake process.

$50M+
Transactions Closed
10+
Years Experience
2
Provinces Licensed
RECO · RECA
Dual-Province

Insights · Sell

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