Rental value

Rental value refers to the rent you may most likely obtain for a space in a building. This value is important to an individual who wants to rent out a commercial or residential space, or wants to determine the potential revenue of an income-producing property.

Rental value is also useful when negotiating or buying out a lease. When estimating the value of a commercial lease, it is first necessary to know the rental value of the space in question.

When the contract rent for a rental space is higher or lower than market rates, it may be helpful to know the market rental value in order to prepare a claim regarding the building in dispute.

In general, rental value refers to market value, meaning the rent level reflecting the market on a given date. In certain situations, however, the rental value sought is based instead on the cost to construct the rental space, and as such, reflects the economic rent, not the market rent.

A contractor who is building a turnkey building or rental space based on tenant specifications will want to determine the economic rent, meaning the rent that will justify the profitability of the investment. This rent does not necessarily follow market trends as it may be higher or lower, depending on the market conditions.

Economic rent is often a reference when a tenant wants to calculate the portion of rent corresponding to the value of leasehold improvements undertaken for the tenant and based on the tenant’s specifications.

According to your needs, our appraisers at HPDG will be able to produce a detailed report including all relevant information regarding the estimated rental value. Note that rental value itself is meaningless without an understanding of the rental conditions on which the value is based. The experience of a certified appraiser will help clarify your understanding of this matter.