What Commercial Appraisers Actually Look For (and Why It Matters to You)

Whether you’re buying, selling, or financing a commercial property, one piece of the puzzle can make or break the deal: the appraisal.

Commercial real estate appraisals aren’t just red tape. They’re critical to helping lenders (and you) understand a property’s actual value, and the risks that may or may not come with it. Yet many people have no idea what appraisers are actually evaluating or why it matters.

Let’s fix that.

Here’s a straight-shooting breakdown of what commercial appraisers look for and why it impacts your bottom line.

1. Property Characteristics

First, appraisers start with the obvious: size, layout, location, age, and condition. But in a market as layered as the GTA, there’s a lot more at play. For example: Is the property close to transit or major arteries? Can trucks get in and out easily? What about zoning or environmental concerns? All of these factors and more affect value, marketability, and how desirable the property is to future tenants or buyers.

2. Comparable Sales (a.k.a. “The Comps”)

Forget wishful thinking. Appraisers look at real, recent, relevant sales of similar properties in the local market additionally they are comparing:

• Size and lot configuration

• Use and zoning

• Location and access

• Building quality and improvements

• Any red flags (like environmental issues or encroachments)

This market data helps them establish a valuation rooted in reality - not hype.

3. Income & Cash Flow Potential

If the property generates revenue, the income approach kicks in.  In utilizing this approach Appraisers look at:

• Rental income and lease terms

• Occupancy/vacancy rates

• Operating expenses

• Market rent comparisons

• Net Operating Income (NOI)

Why? Because lenders care about whether the property can pay for itself; and if not, they’re taking a risk.  At which point they decide whether your company, as the potential buyer, can mitigate that risk.

4. Market Conditions & Trends

What’s going on in the market directly affects value. Appraisers monitor:

• Supply and demand in the area

• Cap rates and investment appetite

• Economic indicators

• Vacancy trends

• Upcoming developments or infrastructure changes

So they are not just looking at the property in a vacuum - they are reading the room.

5. Regulatory & Environmental Compliance

No one wants to lend on a property that’s going to be tied up in red tape. Appraisers check:

• Zoning and permitted uses

• Building code compliance

• Environmental site assessments (especially Phase I and II ESAs)

• Legal access and title restrictions

If something’s off, it affects marketability and appraised value.

6. Highest and Best Use

An appraiser doesn’t just look at what the property is being used for right now. They ask: What’s the most valuable use of this land or building? This is where potential gets priced in. Maybe that older industrial building could be better used as mixed-use, or redeveloped altogether. If zoning allows and the market supports it, that changes the valuation significantly.

So Why Does This Matter?

It matters because the appraisal isn’t just paperwork it can be the baseline for the entire financing deal. If you don’t understand how value is being assessed, you risk overpaying, over leveraging, or getting rejected by your lender. Worse, if you are the seller and your buyer’s financing falls apart due to a low appraisal? You're back at square one. Knowledge is power and leverage, leverage is control. Let’s be real - not all appraisers are created equal. Make sure the one on your file is properly credentialed, experienced, and understands your asset type.

Need an appraiser who knows their stuff?

We’ll connect you with a qualified pro who knows how to get it done right and defend their numbers.
Because your deal deserves better than a half-baked valuation from someone still using a spreadsheet from 2006.  📞 Call us before the lender does.

Want a checklist of what to prepare before your commercial appraisal?

Message me and I’ll send you a free download—no fluff, just facts.

Susan Williamson
Commercial Realtor – Williamson Commercial Realty

✉️ [email protected]

I don’t do cookie-cutter. I do what works, for you.
Built for business. Backed by data. Negotiated with bite.

Client Focused | Solution Driven | Commercial Realtors

Net Operating Income (NOI) in Canadian commercial real estate is a key financial metric used to assess the profitability and performance of income-producing properties. It represents the total income generated by a property from its operations, minus operating expenses; and it excludes certain financial costs like debt service, capital expenditures and income taxes. 

How is NOI Calculated? 

The formula for NOI is straightforward:

NOI = Gross Operating Income - Operating Expenses

1. Gross Operating Income (GOI):  includes all revenue generated from leasing the property, such as base rent, additional rent (i.e., common area maintenance charges, property taxes, and utilities), and any other income streams (i.e., parking fees or storage rentals).
2. Operating Expenses: typically include property management, maintenance, repairs, insurance, property taxes, utilities, and other day-to-day operating costs necessary to maintain and operate the property.

What NOI Excludes:

• Debt Payments (Mortgage): NOI does not account for loan payments or interest.
• Capital Expenditures (CapEx): Large expenses like roof replacement or structural improvements are excluded.
• Depreciation and Amortization: These are non-cash accounting items and not included in NOI.

Why is NOI Important?

NOI is a critical metric for investors and stakeholders in commercial real estate because it provides a clear picture of the property's operating performance and its ability to generate cash flow before considering financing costs and tax implications. A higher NOI indicates stronger operational efficiency and profitability, while a lower NOI may suggest potential challenges or inefficiencies that need to be addressed. 

Investors use NOI to evaluate the financial viability of an investment property, calculate the property's capitalization rate (cap rate), assess its potential return on investment (ROI), and determine its market value through the income approach to valuation. Additionally, lenders may use NOI to assess the property's debt service coverage ratio (DSCR) and loan-to-value (LTV) ratio when underwriting commercial real estate loans. 

1. Property Valuation: Investors often use NOI to calculate a property’s value using the Capitalization Rate (Cap Rate).

2. Investment Performance: NOI helps investors compare the profitability of different properties without being influenced by financing structures.

3. Lender Assessment: Lenders use NOI to determine a property’s ability to cover debt service through the Debt Service Coverage Ratio (DSCR).

Key Considerations:

• Market Sensitivity: NOI can fluctuate due to changes in rental income, occupancy rates, or operating expenses.
• Expense Management: Controlling operating costs without sacrificing property quality is crucial to maximizing NOI.

Whether you're a landlord, investor, or tenant, understanding NOI is essential for navigating commercial real estate effectively.  Wondering if your NOI is a go or a no-go? Contact me—I’ll turn those numbers into something that makes cents

Client Focused | Solution Driven | Commercial Realtors

In commercial real estate, "Net," "Net Net," and "Triple Net" (NNN) are terms used to describe different lease structures that allocate various responsibilities for operating expenses between landlords and tenants. Each term represents a different level of expense responsibility, impacting the overall financial obligations of the parties involved. 

Net Lease (Single Net):

In a Net Lease, also known as a Single Net Lease, the tenant is responsible for paying the base rent plus one type of operating expense, typically property taxes. This means that the tenant pays a fixed rental amount to the landlord, along with their share of property taxes.  Under a Net Lease, the landlord remains responsible for covering other operating expenses such as insurance, maintenance, utilities, and common area expenses.

Net Net Lease (Double Net):

A Net Net Lease, also known as a Double Net Lease, increases the tenant's responsibility by requiring them to pay the base rent plus two types of operating expenses: property taxes and insurance. In addition to property taxes, tenants are responsible for covering insurance premiums, while landlords typically retain responsibility for other operating expenses, including maintenance, utilities, and common area expenses.

Triple Net Lease (NNN):

A Triple Net Lease (NNN) represents the highest level of expense responsibility for tenants. In a Triple Net Lease, tenants pay the base rent plus three types of operating expenses: property taxes, insurance, and common area maintenance (CAM) expenses. Under a Triple Net Lease, tenants assume almost all operating expenses associated with the property, including property taxes, insurance premiums, maintenance costs, utilities, and other common area expenses.  Landlords' financial obligations are minimized in Triple Net Leases, as they typically only remain responsible for structural repairs and capital expenditures on the property.

Key Differences:

Responsibility for Operating Expenses: The primary distinction between these lease types lies in the allocation of operating expenses between landlords and tenants. In Net Leases, tenants typically cover property taxes, while landlords handle other expenses. In Net Net Leases, tenants cover property taxes and insurance, while landlords handle other expenses. In Triple Net Leases, tenants cover property taxes, insurance, and common area maintenance, leaving minimal financial obligations for landlords.

Financial Risk and Control: Triple Net Leases transfer significant financial risk and control to tenants, as they are responsible for a broad range of operating expenses. Conversely, Net Leases provide tenants with greater predictability and stability in their financial obligations, while landlords retain more control over property management and maintenance.

Flexibility and Negotiation: Lease structures can be negotiated between landlords and tenants based on their specific needs and priorities. The choice of lease type depends on factors such as property type, market conditions, tenant preferences, and financial considerations.

Each type of Net lease represents different levels of expense responsibility for tenants in commercial real estate. These lease structures offer varying degrees of financial risk and control for tenants and landlords, highlighting the importance of understanding lease terms and negotiating agreements that align with the interests of all parties involved.

Contact us about net, double net, and triple net leases: because deciphering lease jargon shouldn't feel like navigating a triple-decker sandwich menu.

Client Focused | Solution Driven | Commercial Realtors

What is CAM?

Common Area Maintenance (CAM) refers to the expenses incurred by the landlord to maintain, operate, and manage the shared areas of a commercial property. These areas include spaces accessible to all tenants, such as:

• Hallways
• Lobbies
• Parking lots
• Elevators
• Landscaping and exterior areas

Typical CAM Expenses:

1. Utilities (HVAC and lighting for common areas, water for landscaping)
2. Repairs and Maintenance (roof, HVAC systems in common spaces)
3. Janitorial Services (cleaning of shared spaces)
4. Security Services (guards or surveillance systems)
5. Management Fees (fees charged by property management companies)

What is CAM Reconciliation?

CAM Reconciliation is the annual process where the landlord compares the estimated CAM charges (billed monthly to tenants) with the actual expenses incurred during the year.

1. Estimation: At the start of the lease year, the landlord estimates the CAM expenses and divides them among tenants.
2. Actual Costs vs. Estimates: At the end of the year, the landlord totals the actual CAM expenses and compares them to the amounts collected from tenants.
3. Adjustments:
   • If actual costs were higher than estimated, tenants may be billed for the shortfall.
   • If actual costs were lower, tenants may receive a refund or credit toward future payments.

Why CAM Reconciliation Matters:

1. Transparency: Ensures tenants only pay their fair share of expenses.
2. Fluctuation in Costs: Unexpected maintenance or rising utility costs can significantly impact CAM charges.
3. Lease Negotiations: Tenants should carefully review lease terms to understand what is included in CAM charges and request caps on increases if possible.

Understanding CAM and reconciliation is crucial for tenants to manage their operating costs effectively and avoid surprises in their annual expenses.  

Have questions about CAM charges? Reach out—I’ll help you decode those mysterious fees faster than your Wi-Fi can reconnect.

Client Focused | Solution Driven | Commercial Realtors

Renewing a commercial lease may seem straightforward, but without proper guidance, tenants risk missing out on valuable opportunities and negotiating favourable terms. This is where the expertise of a commercial realtor becomes invaluable. The following are a few of the numerous reasons why engaging a commercial realtor for your lease renewal is a wise decision that can lead to cost savings, favourable terms, and peace of mind.

1. Market Insight and Analysis:

Commercial realtors possess in-depth knowledge of local market conditions, including current rental rates, vacancy rates, and emerging trends. By leveraging this information, they can conduct thorough market analyses to determine whether your current lease terms are competitive and advise you on potential negotiation strategies.

2. Negotiation Expertise:

Negotiating a lease renewal requires skill and finesse to achieve favorable terms while maintaining a positive relationship with the landlord. Commercial realtors are seasoned negotiators who understand the intricacies of lease agreements and can advocate on your behalf to secure concessions such as rent abatements or reductions, tenant improvement allowances, or lease term extensions.

3. Access to Comparable Lease Data:

Commercial realtors have access to databases containing comprehensive information on comparable lease transactions in the market. This data allows them to benchmark your current lease terms against similar properties and identify opportunities for renegotiation or relocation to a more advantageous space.

4. Time and Resource Efficiency:

Managing the lease renewal process can be time-consuming and resource-intensive, particularly for busy business owners or corporate tenants. By entrusting this task to a commercial realtor, you can focus on running your business while they handle the complexities of lease negotiation, paperwork, and coordination with landlords and property managers.

5. Objective Advice and Advocacy:

Commercial realtors provide objective advice based on their professional expertise and fiduciary duty to represent your best interests. They can offer impartial guidance on whether to renew your lease, explore alternative options, or renegotiate terms with your current landlord, ensuring that you make informed decisions aligned with your business goals.

6. Mitigation of Risks and Liabilities:

Lease agreements contain numerous provisions that can have significant financial and legal implications for tenants. Commercial realtors regularly review lease documents and may be able to identify potential risks, liabilities, and hidden costs, such as operating expenses or maintenance obligations, and negotiate favourable terms to mitigate these risks.

7. Long-Term Strategic Planning:

A commercial realtor serves as a strategic partner throughout the lease renewal process, helping you assess your long-term real estate needs and objectives. Whether you're expanding, downsizing, or relocating, they can provide valuable insights and guidance to ensure that your lease renewal aligns with your business growth strategy.

Renewing a commercial lease is a critical decision that can impact your business's bottom line and long-term success. By enlisting the services of a knowledgeable and experienced commercial realtor, you gain access to market insights, negotiation expertise, and strategic guidance that can maximize the value of your lease renewal. From analyzing market conditions to negotiating favorable terms and managing risks, a commercial realtor serves as your trusted advisor and advocate throughout the lease renewal process, empowering you to make informed decisions and secure the best possible outcome for your business.

Reach out to us for your lease renewal negotiations; we'll charm your landlord into lowering your rent like it's a magic trick...except instead of rabbits, you get savings!

Client Focused | Solution Driven | Commercial Realtors

Why the BOMA Standard Matters to both Tenants and Landlords

When it comes to navigating the world of commercial real estate, understanding the rules of the game is essential. One crucial rulebook that both Landlords and Tenants rely upon is the BOMA standard. The Building Owners and Managers Association (BOMA) standard sets the stage for fair and transparent dealings in the realm of commercial property leasing. We will dive into what the BOMA standard is and why it matters to both property owners and tenants.

What is the BOMA Standard?

The BOMA standard refers to a set of guidelines and measurements established by the Building Owners and Managers Association. This esteemed organization has developed these standards to provide a consistent and universally accepted method for measuring various aspects of commercial properties, such as office spaces, retail units, and industrial buildings. The primary aim is to ensure fairness and transparency in lease agreements, property valuations, and other real estate transactions.

The Benefits for Tenants:

Transparent Rent Calculations

For business tenants, the BOMA standard offers a transparent framework for calculating rent. Tenants can rest assured that the rentable area they're paying for is accurately calculated, eliminating any ambiguity about costs.

Informed Decision Making

With standardized measurements, Tenants can make informed decisions when comparing different properties. They can accurately assess whether a space meets their needs, both in terms of size and layout.

Accurate Space Planning

Utilizing the BOMA standard, Tenants can effectively plan how to use their space, optimizing layout and operations. This level of accuracy is crucial for creating an efficient and productive workspace.

Prevention of Disputes

By adhering to the BOMA standard, both Tenants and Landlords have a common framework for space measurements. This reduces the likelihood of disputes over space calculations during lease negotiations.

Cost Efficiency

Accurate measurements prevent Tenants from paying for excess or unusable space. This directly translates to cost savings, as businesses are only billed for the space they truly need.

The Benefits for Property Owners:

Fair and Equitable Leasing

The BOMA standard ensures that property owners provide accurate measurements for potential tenants, promoting fairness in leasing practices.

Transparent Property Valuations

Following BOMA standards helps property owners maintain consistent property valuations. This is vital for financial planning, reporting, and potential future sales or acquisitions.

Compliance with Industry Regulations

By adhering to the BOMA standard, property owners ensure their properties are compliant with industry regulations and practices, avoiding legal complications.

Streamlined Lease Negotiations

Consistent measurements facilitate lease negotiations, benefiting property owners by simplifying the process and minimizing negotiation time.

In conclusion, the BOMA standard serves as a cornerstone of transparency, fairness, and consistency in commercial real estate. Both property owners and business tenants benefit from a level playing field, accurate measurements, and a streamlined leasing process. Whether you're a property owner looking to provide accurate measurements or a Tenant seeking transparent rental agreements, embracing the BOMA standard is a smart move in the complex world of commercial real estate.  

Contact Us : its like social media, but more about square footage.

Client Focused | Solution Driven | Commercial Realtors