How to determine price per sq ft??

Question

Hello friends! I’m looking for some help. In short, I’m trying to determine how to price rent for a commercial property we have. I can’t seem to find how one comes up with price per sq ft. I’m assuming it’s based on a few factors and varies from area to area. I don’t see too many comps in my area to use so is there an easy way that will tell me fair market value per sq ft or is there not a easy way? Thanks in advance!

Robert S Struhala Jr · Answer

@Will Fraser

Very cool, thank you for your input. I will do all the research I can to get my answer. Just wanted to check and see if there was something simpler I was missing. Thanks!

Will Fraser · Answer

Gotcha.  I think you’re right . . . It’s not as simple as would be idea.  You can deploy the “best and highest” concept to your property and determine if a re-development into a different usage would be more valuable, and then us the comparable sales approach there, if so.

For example, several mega warehouses in the old metal-works part of my town are being redeveloped from Industrial to . . . .everything else.  Each of these redevelopments has a slightly different value, based on the end-use.

Robert S Struhala Jr · Answer

@Will Fraser

Thank you for your reply. I guess this was more of a general questions as I review my current rentals to make sure they are not below current market value. However specially I was seeking this info for a commercial property that is part office, part warehouse. I know the two would have different values. I was hoping there might be some fairly easy way to determine price per sq ft base off the type of space and location. I’m starting to think it’s not that easy.

Will Fraser · Answer

Hi @Robert S Struhala Jr, that will vary a bit with the specific asset you’re looking at.  Are you trying to determine this for a multi family property, self storage, retail, office, or something different?

Most of the time with commercial properties the prevailing data point is the cap rate (verses in residential the price per square foot is exceedingly important).  There are cases and uses for the price per square foot on a commercial property, but it is normally a secondary concern to the other financials.