What type of commercial building? Who are the tenants? How long are leases? Is there any vacancy? What's the status of competition?
If you are talking a triple AAA rated credit tenant on a 50 year lease with annual escalations, then look to the bond rating of the tenant.
An empty restaurant ... no cap rate applies. If it's a quality restaurant like the Five Crowns, then I would look at the lease rate and term, compare to market. Probably nothing above a 7% in CDM.
If you are talking about a low quality, low rise, multi-tenant office with 50% vacancy and tenants facing vacancy then look to double digit cap rates.
There are a plethora of factors that go into estimating a cap rate, I'd recommend contacting a real estate professional and ask to see comparables in the local market. Conact me if you have further questions ... firstname.lastname@example.org
Jan 16, 2009