When it comes to buying or selling commercial real estate, knowing how to do comps is essential. Comps, or comparable sales, refer to the recent sales of similar properties in the same market. By comparing the sales prices of these properties, you can get an idea of what a property is worth and what you should be willing to pay for it.
Doing commercial real estate comps can be a complex process that requires a deep understanding of the market and the factors that influence property prices. While there are many tools and resources available to help you with this process, it’s important to approach it with a critical eye and to use a variety of sources to ensure that you get an accurate picture of the market. Some of the key factors to consider when doing commercial real estate comps include the location of the property, its size and condition, the current market conditions, and any unique features or amenities that it offers. Additionally, the use of AI and other advanced technologies can help streamline the process of doing comps and provide more accurate and reliable data.
Understanding Commercial Real Estate Comps
What Are Comps?
Comps, or comparables, are similar properties to the subject property that have recently sold or leased in the same market. These properties have similar physical characteristics, such as size, location, and amenities, and are used to determine the market value of the subject property. Comps can be found in databases, such as CoStar, Reonomy, and public property records.
Why Are Comps Important?
Comps are important because they provide accurate data for valuations and sales comps. They are used by appraisers, buyers, sellers, lenders, and other CRE professionals to determine the market value of a property. Comps help to establish a baseline for pricing and provide insight into market conditions and trends.
How Are Comps Used?
Comps are used to determine the market value of a property by comparing the subject property to similar properties that have recently sold or leased in the same market. The data from these comps is used to calculate the capitalization rate, net operating income, and operating expenses. Comps can also be used to identify potential investment opportunities and to negotiate with buyers and sellers.
What Makes a Good Comp?
A good comp is a property that is similar to the subject property in terms of physical characteristics, such as size, location, and amenities. The sale date, transaction type, and execution date or commencement date should also be similar. The property type, lease term, tenant name, and landlord concessions should also be taken into consideration. Additionally, the lot size, upgrades, and sales history should be similar to the subject property.
In conclusion, understanding commercial real estate comps is essential for buyers, sellers, and other CRE professionals. Comps provide accurate data for valuations, sales comps, and investment opportunities. By using comps, buyers and sellers can negotiate with confidence and make informed decisions.
Finding Comps
When it comes to commercial real estate, finding accurate comps is essential to determining the market value of a property. There are several ways to find commercial real estate comps, including using online databases, working with brokers, and analyzing public records.
Using Online Databases
One of the easiest ways to find commercial real estate comps is to use online databases. These databases provide access to a wealth of information, including sales history, property type, sale date, physical characteristics, submarket, and more. Some popular databases include Reonomy, CoStar Data, and CommercialEdge.
Reonomy is an AI-powered database that uses machine learning to provide users with accurate and up-to-date information on commercial properties. CoStar Data is another popular database that provides access to a vast amount of commercial real estate data. CommercialEdge is a newer platform that offers a user-friendly interface and advanced search filters.
Working with Brokers
Another way to find commercial real estate comps is to work with brokers. Brokers have access to a wide range of information that may not be available to the public, including expired listings and commercial lease comps. They can also provide valuable insights into market trends and pricing.
When working with brokers, it’s important to provide as much information as possible, including the full address of the property and the execution date or commencement date of any recent sales or leases.
Analyzing Public Records
Analyzing public records is another way to find commercial real estate comps. Public records provide access to information on recent sales and leases, as well as physical characteristics and other details about a property.
Some popular public record databases include Reonomy and CoStar Data. It’s important to note that public records may not always be up-to-date or accurate, so it’s important to verify any information found through public records with other sources.
In conclusion, finding accurate commercial real estate comps requires a thorough understanding of the market and access to reliable information. By using online databases, working with brokers, and analyzing public records, investors and brokers can gain valuable insights into the market and make informed decisions about pricing and investment opportunities.
Analyzing Comps
When it comes to analyzing commercial real estate comps, there are a few key factors to keep in mind. In this section, we will cover how to compare properties, adjust for differences, and calculate market value using comps data.
Comparing Properties
Comparing properties is the first step in analyzing comps. When looking at comps data, it’s important to consider factors such as the property type, square footage, net operating income, operating expenses, lease term, upgrades, lot size, and physical characteristics. By comparing these factors across different properties, you can get a better sense of the market value for a given asset type.
Adjusting for Differences
Once you’ve compared properties, the next step is to adjust for differences. For example, if you’re comparing a retail property to an industrial property, you’ll need to adjust for the different market dynamics and pricing structures that exist in each market. Similarly, if you’re comparing properties in different submarkets, you’ll need to adjust for differences in pricing and demand.
Calculating Market Value
Finally, once you’ve compared properties and adjusted for differences, you can begin to calculate market value. This is typically done using a combination of sales comps data, cap rate analysis, and other valuation metrics. By analyzing sales comps data, you can get a sense of what similar properties have sold for in the past, which can help inform your market value estimates.
In addition to sales comps data, it’s also important to consider other factors such as tenant name, transaction size, landlord concessions, and execution date or commencement date. By taking all of these factors into account, you can arrive at a more accurate estimate of market value for a given asset type.
Overall, analyzing commercial real estate comps requires a careful consideration of a wide range of factors, including accurate data, market dynamics, and pricing trends. By using tools such as Reonomy or Costar, and working with a knowledgeable CRE professional, you can get a better sense of the market value for any given property or asset type.
Conclusion
In conclusion, conducting commercial real estate comps is a critical step in determining the market value of a property. It is essential to have accurate data to make informed decisions when buying or selling commercial real estate. Using AI and machine learning tools like Reonomy can help filter through a vast database of commercial property data to find relevant comparables quickly.
When searching for real estate comps, it is crucial to consider the property type, square footage, upgrades, lot size, and physical characteristics. Additionally, it is essential to consider the net operating income, operating expenses, lease term, and tenant name to determine the property’s value accurately.
CRE professionals can use public property records, Costar data, and expired listings to find sales comps. Using a comps tool with complex and accurate filters like CommercialEdge can help provide a thorough analysis of the market conditions and pricing in the area.
Appraisers can use comparable company analysis to analyze market trends and determine the asset type’s value. The comps table should list all the relevant information about the companies, including the company name, share price, market capitalization, and net debt.
Buyers and sellers can use sales comparables to determine the transaction size and cap rate. Lenders can use commercial lease comps to determine the landlord concessions and execution date or commencement date.
In summary, conducting commercial real estate comps requires a thorough understanding of the market, property type, and physical characteristics. Utilizing accurate data and tools like Reonomy and CommercialEdge can help streamline the process and provide a more accurate valuation of the property.
