valuation France

Business premises valuation: highly diversified assets

Halfway between warehouses and offices, business premises devote up to 80% of their surface area to production and/or handling activities. They vary greatly in size and can be used for the activities of local SMEs as well as international firms. They are therefore mainly aimed at an occupier market and are of interest to investors as part of diversification strategies

Although the market is relatively stable, the large diversity of these assets makes their valuation complex. Our experts value them on a case-by-case basis.

Our expert’s point of view

Marc Baudot

MRICS expert specialised in business premises valuation

What are the specificities of business premises?

Business premises are used by companies of varying sizes, ranging from local SMEs to large international firms. The activities carried out therein are quite varied and include: production, small assembly, storage, distribution, handling, shipping and a minimal amount of administrative services. Examples of business premises include a motorcycle garage with a showroom or a repair shop with a few offices. In the case of the pharmaceutical industry, a business premises could include sterile(sanitised) rooms with a levelling dock for shipping products. In other cases, a business premises could feature an assembly line of small electronic parts for mobile phones. They are usually found on the outskirts of urban areas.

 

What are the characteristics of the business premises market?

Business premises are mainly of interest to occupiers (in the context of a transfer or takeover of a company) and investors. In the latter case, they are often real estate owners who wish to diversify their assets by means of atypical investments. That said, institutional investors are rarer on this type of asset. The share of French investors is significant in this sector. BNP Paribas Real Estate – Valuation’s valuers have developed techniques that enable them to propose several valuation scenarios adapted to each situation.

 

What are the characteristics that affect the value of a business premises?

Occupiers pay particular attention to the adaptability of divisions: the larger the divisions, the more valuable the activity space becomes. Flexibility is a requirement. Comfort, heating, lighting (whether it’s zenithal or façade style) are all elements that can increase the value of the asset. Ceiling heights can also be an asset when mezzanines are used. Finally, the presence of dock doors adds versatility to the property that increases its value. The main standards for professional premises (ERP, accessibility) and even more specific standards (e. g. for pharmaceutical laboratories) are important aspects to note. In any case, these criteria must always be examined in relation to the type of activity carried out in the premises being valued.

Key Valuation Criteria

The variety of these premises, in terms of size, nature or sector of activity, makes their valuation complex: our experts work on a case-by-case basis. Customers can also be very different: occupiers, real estate companies or international investors do not have the same expectations.

Location

Constraints related to urban surroundings, proximity to a shopping area

Vacancy rate

The vacancy of neighbouring premises means that the market is not very dynamic

Interior design

Comfort and performance of installations, functionalities, lighting, heating, etc.

Equipment

Ceiling height, number of dock doors, compliance with standards, etc.

Standards

Standards specific to logistics activities

Because of their variety and diversity, business premises are often reconverted. As such, experts at BNP Paribas Real Estate - Valuation generally propose different valuation scenarios. For example, an investor is interested in letting a business premises from the 1960s. If the building has potential, a "property trader” approach can be adopted, which consists of retaining the walls and rehabilitating the premises. Another option is the land tenure approach. In this case, the land is valued on the basis of data collected by BNP Paribas Real Estate - Valuation on the environment surrounding the asset (location of the land, constraints of the urban plan...) and on the market. The property is then levelled to build a new one.

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