How Much Is My Commercial Building Worth? (Explained Simply)

Every owner asks this question before selling.

Most get one of two bad answers. Either a number pulled from thin air, or "it depends" with nothing after it.

Here's the real answer. There are three ways to value a commercial building, and once you know them, you can check any number someone hands you.

The Short Answer

A commercial building gets valued three ways:

• The income approach: what the building earns
• The sales comparison approach: what similar buildings sold for
• The cost approach: what it would cost to rebuild it

For most buildings with tenants, the income approach carries the most weight. Buyers are paying for cash flow, so cash flow sets the price.

Let's run all three on the same building, an 11,000-square-foot multi-tenant office building in a suburban market.

Method 1: The Income Approach

This is the one buyers trust most. Take your net operating income (NOI), which is income minus operating expenses before debt payments, and divide it by a market cap rate.

• Gross rental income: $205,000
• Operating expenses: $65,000
• NOI: $140,000
• Cap rate: 6.6%
• Value: $140,000 ÷ 0.066 = about $2.12 million

Why 6.6%? According to CRE Daily's breakdown of CBRE's survey, the all-property average cap rate sat near 6.6% in the first half of 2026. That's a national average, not your number. Your cap rate depends on property type, class, location, and tenant quality.

That matters. The same survey found that expectations of rising cap rates were strongest for Class C buildings, especially Class C office. A higher cap rate means a lower value on the same income.

Method 2: The Sales Comparison Approach

This one looks at what similar buildings actually sold for, usually measured in price per square foot.

Say three comparable office buildings nearby sold recently:

• Comp A: $185 per square foot
• Comp B: $200 per square foot
• Comp C: $210 per square foot
• Average: about $198 per square foot
• Value: $198 × 11,000 square feet = about $2.18 million

One warning. Use closed sales, not asking prices. An asking price is a wish. A closed sale is a fact.

Asking prices still tell you something useful, though. They show what you'd be competing against. Browsing active listings in your submarket tells you how crowded your corner of the market is before you set a price.

Method 3: The Cost Approach

This one asks a different question. What would it cost to buy the land and build this exact building today, minus wear and age?

• Land value: $400,000
• Replacement cost: 11,000 square feet × $220 = $2.42 million
• Depreciation (age, wear, outdated design) at 30%: minus $726,000
• Value: $400,000 + $1,694,000 = about $2.09 million

Buyers rarely price a leased building this way. It matters most for newer properties, special-use buildings like churches or schools, and insurance purposes. It also works as a sanity check. If your income value runs far above replacement cost, a buyer will ask why they shouldn't just build their own.

Which Number Wins?

Here, all three landed between $2.09 million and $2.18 million. That's what a well-supported value looks like. The methods agree.

When they don't agree, the income approach usually wins for any building with tenants. A buyer financing the deal will see a lender underwrite the NOI, not the replacement cost.

Two quick checks before you trust any number:

• Is the NOI real? It should come from your trailing 12 months, not a pro forma.
• Is the cap rate sourced? A one-point difference on $140,000 of NOI moves value by roughly $300,000.

Article 3 in this series covers the difference between a broker opinion of value and a formal appraisal, and when you need each.

Recap

• Commercial buildings get valued three ways: income, sales comparison, and cost
• The income approach divides NOI by a cap rate and usually carries the most weight
• Sales comps should be closed sales, never asking prices
• The cost approach is a sanity check, not the main event for leased buildings
• When all three methods land close together, the value is well supported

Final Word

Your building isn't worth what you paid for it or what the owner down the street is asking. It's worth what its income justifies, checked against what buyers actually paid. Know all three numbers before anyone else hands you one.

See what's already on the market in your area. Browse commercial listings at hutfin.com.