How commercial property is priced
Leased investment property is priced primarily on income — NOI and cap-rate comps for the type and submarket (see the cap-rate guide) — with lease quality (tenant credit, term remaining, escalations) driving the cap rate. Vacant or owner-user buildings are priced more like real property: price per square foot against similar sales, replacement cost, and what an owner-occupant would pay to stop leasing. Land is priced on entitlements and buildable use. Your agent, and usually an appraiser or a broker opinion of value, will tell you which lens fits your building — Nalren doesn't publish estimates.
The package that sets the price
- Leases, amendments, and a rent roll; estoppels and often SNDAs from tenants during escrow.
- Operating statements — trailing 12–36 months, plus current tax and insurance bills.
- Building information — square-footage source, site plan, zoning and permitted use, parking count, roof/HVAC age, ADA/CASp status.
- Environmental — buyers and lenders will order a Phase I environmental site assessment; if you have a prior Phase I or know of underground tanks, dry-cleaner history, or auto uses, disclose them and get ahead of it.
- Title and survey — a preliminary title report and, for larger deals, an ALTA survey; easements and CC&Rs matter more on commercial parcels.
- Natural-hazard and seismic disclosures — commercial sales still carry disclosure duties, and some cities have retrofit ordinances for older concrete or unreinforced-masonry buildings.
Marketing and the offer
An offering memorandum, the commercial listing platforms plus the MLS, and direct outreach to owner-user and investor lists. Offers commonly come as a letter of intent first, then a purchase agreement (the AIR CRE forms are standard in California). Expect negotiation over the due-diligence period (often 30–45 days), the deposit and when it goes non-refundable, any financing contingency, and who pays which closing costs — county custom varies.
Timeline, taxes, and the 1031 clock
A well-prepared listing typically runs a few weeks of prep, a marketing period, a 30–45 day due-diligence window, and a 30–60 day close — two to four months is normal, longer for specialty assets. At closing the property is reassessed under Prop 13; documentary transfer tax applies at the county level, with city surtaxes in some markets (Los Angeles adds a significant transfer tax above a threshold that adjusts annually). Capital gains and depreciation recapture are significant — if a 1031 exchange is on the table, engage a qualified intermediary before closing and plan around the 45-day identification / 180-day closing deadlines. Bring your CPA in before you list.