Value of commercial space in a residential building

The commercial spaces are more than likely paying their pro-rata share of operating costs and real estate for the building. Unlike the live/work spaces which usually are treated as a residential lease and therefore, do not usually pay their pro-rata share of operating and real estate separately, only through a straight rent. Also, commercial first floor leases are almost always retail and thus, pay much higher rents.

Thanks. That all makes sense.

But :-) I was really trying to understand how to estimate its sale value as a commercial condo.

C'mon appraiser! Explain the discount for commercial vs. residential condos.

Commercial space is valued by using an income based approach. Figure out how much income is thrown off, or could be thrown off, by the leasing of the two spaces -- Net Operating Income or NOI.

For example if the space rents for $25,000 per unit per year and after paying for expenses (excluding capital expenses and debt payment) there is $20,000 left over this your NOI.

You then take the NOI and divide it by a Capitilization Rate. Using 6% as a Cap Rate - the space would be worth $333,333.

fantastic. thanks!