How much is my commercial property worth?

Work it out in four steps

1. Add up the rent. Everything the tenants pay in a year, including what they pay you back for taxes, insurance or common-area upkeep.
2. Allow for vacancy. Buyers plan on some empty space over time. We assume the building runs 90% leased. If it’s already below that, we use the rent it actually collects.
3. Subtract the costs you pay. Property taxes, insurance, repairs, utilities you cover, management and upkeep. Leave out the mortgage, because the value doesn’t depend on how the building was financed.
4. Divide by the cap rate. What’s left is the net operating income. Divide it by the cap rate for your type of property and market.

$128,000 NOI ÷ 7.25% cap rate = $1,765,517

That example is a strip center collecting $180,000 a year with $52,000 of costs. Cap rates move, so we show a range: at a 6.75% cap rate it’s about $1.9 million, and at 7.75% about $1.65 million.

What is a cap rate?

The cap rate is the yearly return a buyer expects from the building’s income, before any loan. A lower cap rate means buyers will pay more for the same income. A building earning $100,000 a year is worth $1.25 million at an 8% cap rate and about $1.67 million at 6%.

Cap rates depend on the type of property, the market, the tenants and how long their leases run, and the building’s condition.

Typical cap rates for small commercial buildings

These are the working ranges our estimator uses for small, owner-run buildings, informed by 2026 market reports and our own listing data. Florida runs about a quarter point lower and Ohio and Indiana about a quarter point higher. Large institutional properties trade at lower cap rates, and your building’s real cap rate depends on its leases and location.

What raises or lowers the value

• Lease length and tenant quality. Long leases with steady tenants raise the value. Month-to-month tenants lower it.
• Rents below market. They lower today’s value, but they leave room for a buyer to raise rents at renewal.
• Empty units. They lower the income today. How easy they are to fill decides how much.
• Who pays the costs. If tenants pay taxes, insurance and upkeep (a triple-net lease), more of the rent reaches you.
• Repairs coming up. A roof, parking lot or HVAC system near the end of its life comes off the price.
• Location. Traffic, visibility, parking and the neighbors all matter, most of all for retail.

Why home-value websites and tax assessments miss

Home-value websites are built for houses. They compare recent sales of similar homes and know nothing about your leases or your costs. The county’s assessed value is set for property taxes and often lags the market by years.

What you paid, and what you put in, don’t set the price

Buyers pay for the income the building produces today and can produce soon. Money spent on improvements counts when it shows up as higher rent or lower costs. When it doesn’t, it rarely adds to the price, which can be hard to hear after years of investing in a building.

Sell, lease or hold?

If the building is easy to run and you don’t need the money, holding can make sense. Selling makes sense when the money has a better job: paying off higher-rate debt, buying something you’d rather own, helping family, or stepping back from being a landlord. Either way, knowing today’s number makes the decision easier, and so does knowing it before you answer an offer someone has made you.