Fair Market Rent Estimates, Fair Market Rent Value and Appraisals
Walter Duke + Partners is regularly called upon to help determine the fair market rent for commercial real estate. In some cases, it’s to help landlords and tenants negotiate lease renewals in commercial properties. In other cases, it’s to help partners or corporations support a business arrangement.
6 Factors That Impact Fair Market Rent
Although a successful renewal strategy is tailored based upon the building’s situation as well as internal objectives, there are six key elements that impact fair market rent:
- Lease Terms – there must be a clear understanding of both positive and negative lease provisions and clauses as well as the term of the lease itself. All can dramatically impact fair market rent and ultimately asset value.
- Competitive Market Position – proper estimation of fair market rent hinges upon the ability to understand the issues and implications of the building’s current situation, including ownership profile and their financial objectives, building debt, tenant profile including credit, rate, and rollover, and the market perspective.
- Market Conditions – is the market soft? Are rental rates declining or trending upward? Are external market conditions favorable to the tenant or landlord?
- Tenant Improvements – tenant improvements can be very expensive and have a direct impact on achievable rental rates. What are current costs? What are typical allowances in the primary market area?
- Parking – as office usage changes and parking becomes even more critical Walter Duke + Partners helps their clients understand the impact of parking on achievable market rent.
- Signage – the cost and value of proper signage or lack thereof can have a dramatic impact on fair market rent.
Credible Market Research is Key for Tenant or Landlord Representation of Fair Market Rent
A critical part of any accurate market rent estimate includes a credible search of the market and understanding of current and forecasted market trends. We help our clients assess current market conditions and whether or not those conditions will impact the value of fair market rent.
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