THERE ARE SEVERAL MAIN METHODS:

1) Income Method (CAP rate / “yield”)

Main idea: price = net annual income / market yield (CAP)

  • NOI (Net Operating Income) = annual rental income – owner’s operating expenses (excluding loan, VAT specifics, etc.)
  • CAP depends on: location, tenant reliability, contract duration, indexing, asset liquidity, property condition, market alternatives.

Example:
NOI = 120 000 €/yr.
Market CAP = 7.5%
Price ≈ 120 000 / 0.075 = 1 600 000 €

2) Comparative Transaction Method (market comps)

Considered:

  • for how much similar profile property was actually sold,
  • under what conditions (tenant, contract duration, rent level, purpose, location),
  • what are the market CAP ranges for a specific segment.

In commercial real estate, “price per m²” is an auxiliary metric; in investment logic, it is often secondary (unless it’s a “vacant” property or a development project).

3) Cost / Replacement Value Method

Useful when:

  • specialized property (where there are few transactions in the market),
  • as a “floor”: how much it would cost to build an equivalent today.

For investment property, this is usually an additional valuation, because the investor is interested not in “how much it cost to build,” but in “how much it earns and what the risk is.”