To calculate the value of a commercial property, there are four main methods that appraisers use: the sales comparison approach, the income approach, the cost approach, and the hybrid approach.
The sales comparison approach is when an appraiser looks at similar properties that have recently sold in order to estimate the value of the property being appraised. The income approach is when an appraiser estimates the present value of future cash flows from renting out or leasing the property. The cost approach is when an appraiser calculates what it would cost to replace the improvements on a property with new construction. The hybrid approach is a combination of two or more of these methods.
Appraisers will also consider other factors such as location, zoning, and environmental issues when estimating the value of a commercial property.