Commercial buildings refer to buildings used for commercial purposes, whose main value is reflected in commercial purposes.For example, it is used to rent out theBuilding。
Buildings dedicated to commercial activities.Historically, due to the slow economic development and underdeveloped commerce in Macao, most of the businesses were operating on the ground floor of old residential buildings.At the end of 1960s, Macao was the firstspecializedYongheng Bank Building, a commercial building for commercial institutions to rent office buildings (offices), was completed.Subsequently, the self used Nanguang Building of Nanguang Company was also completed.In the 1970s, Dafeng Bank was established in 1974large building。Later, Deji Commercial Building was built.However, the office buildings available for rent in Macao at this timethe measure of areaIt is still less than 4000 square meters, and the construction of commercial buildings is still very few.
Commercial building
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The public commercial building is a new type of commercial real estate established due to commercial development, mainly a consumer shopping place.Public commercial building is a kind of real estate that is rented out for merchants to retail.
It is a new type of commercialized real estate established due to commercial development, mainly a consumer shopping place, and a real estate that rents out real estate for merchants to retail goods.
Evaluation of commercial buildings
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Evaluation Method of Commercial Real Estate Evaluation Shopping Center Value
Determining the Value of A shopping Center
Building the value of real estate is based on many reasons, including obtaining financial loans to attract buyers to sell or measuring growth.
There are many ways to assess the value of real estate. The traditional appraisal usually includes the following three deduction methods:
Reconstruction cost method: the argument of this method is to treat the land where the shopping center is located as vacant land, assess its market value, and then add the construction cost required to rebuild similar shopping centers, minus the total value of possible depreciation.Depreciation estimation is the key to the accuracy of this method of valuation. Especially for shopping centers that have been established for a long time, their values may have cognitive differences due to depreciation estimation. In addition, the goodwill established by developers is difficult to be included in the factors considered.
Market Sales Comparison: This method is the simplest. In order to compare the prices of similar shopping centers in nearby areas in the near future, the standard comparison method includes the price of each square meter of buildings. However, the biggest constraint of this evaluation method is that there is often a lack of comparable cases in the market.
Cash Flow Analysis: This method is to estimate the current value of the net cash flow that the shopping center may generate every year in its operating cycle or in a specific period. The current value means the cumulative value of the annual net cash flow minus interest until the expected date,However, its accuracy depends on the rationality of the estimated quality and the capitalization rate used.
The Income Approach Net Cash Flow Analysis
calculationNet operating incomeBasic steps of taxable income and net cash income:
1. Determine the overall rental income of the shopping center minus the vacant house and other rental losses.
2. Net operating income (NOI) is obtained by subtracting the above amount from operating expenses.
3. The taxable income is the net operating income minus the current depreciation amount and loan interest expenses.
4. The taxable income minus the business tax and income tax at the investor tax rate is the after tax income.
5. After tax income minus loan principal expenditure is the cash item that has been paid.
6. Add back depreciation (because it is not actually paid in cash), it is net cash income.
The method of net cash inflow can be used to estimate the value of shopping centers, because the real estate itself is a capital intensive industry, and its profits need to be held for a long time. As mentioned above, an investment product is to convert the possible income into today's currency value (estimate the total present value of its income in a predetermined period of time), which is called capitalization,It decided to pay the amount of real estate in the open market (Capital Sum) in exchange for the estimated amount in the future holding timeNet cash flow。The coefficient that converts income into value is called the capital rate. It is a percentage figure, which is the ratio of the risk discount rate and the capital recovery rate. This figure does not include the devaluation of capital itself or the cost of borrowing services. This figure is obtained by market forces through negotiation,This interest rate level is also affected by the following circumstances:
·Real estate market conditions and different investment opportunities.
·Capital market - In this market, buyers and sellers trade different forms of long-term financial products together (long-term means more than one year), such as stocks, funds, bonds.
·The financial market, including all kinds of financial products with a term of less than one year in various forms, and there is an interactive relationship between the financial market and the capital market. Generally, the longer the money is available, the higher the risk, that is, the higher the interest rate level. Therefore, the interest rate and recovery of long-term investment tools should be higher than that of short-term investment tools.
The formula for net cash income to estimate the value of real estate is as follows:
Real estate value (V)=Net operating income/capitalization rate
The following is a simple calculation case:
Shopping center size: 100000
Land cost of shopping center: $300000
Construction cost of shopping center: $5000000
Gross operating income: $11
Operating expenses: $3
Discount rate: 11.75%
Net cash inflow: (gross operating income less operating expenses)
($11/sqft*100,000)-($3/sqft*100,000)=$800,000
Real estate value (Value)=$800000 ÷ 11.75%=$6808511
The market value of this property is $6800000
Since the discount rate reflects the market situation, the value of shopping centers will vary with the discount rate in different regions.
What Careful Management Can Do to Affect Value
In terms of administrative expenses, even small expenses will have a significant impact on the value of real estate after adjustment of the discount rate.For example, suppose that the public area management expense is $78600, of which only $50500 can be borne by the rental retailer according to the lease agreement. If this clause can be deleted, the difference is $28100. If calculated at the 11% discount rate, it means that the market value of the shopping center will be improved by $255455.
Income Management
For shopping mall managers, it is very important to realize the maximum net cash inflow without affecting the long-term productivity and competitiveness of the shopping mall. Shopping mall managers must carefully examine the contents of the lease contract, including:
·General terms of lease
·Tax liability and insurance liability
·Rent relief and percentage rent
·Maintenance and management expenses of public areas
·Credit level of tenants
For the possible terms of the long-term lease contract, the following contents should be further examined:
·Re determine the rent terms and other relocation taxes related to taxes
·Advertising terms
·Lease Termination Clause
·Management expense sharing clause
·Basic net rent terms (including general rent, percentage rent and other expense sharing)
Shopping mall managers should also have a deep understanding of other contents, including:
·Competitiveness of local retail market
·Social, economic, political and environmental changes
·Pay special attention to the sales ability, display planning and advertising marketing concept of rental retailers.
