Commercial Real Estate Valuation

[Damien McDonald]

We are selling a commercial property (all retail and office space) and are getting an independent valuation done on it. We have a copy of the draft valuation, and the report uses the capitalization method as the primary indication of value. In coming up with a cap rate, the appraiser selects 5 comps. 3 of the comps were 75%-81% occupied when they sold. The appraiser made adjustments to the comps income numbers to bring them to 100% occupancy (as is the subject property we are selling). My question is, is it appropriate to adjust the occupancy of the comps when assessing the comps cap rate?

My thought is that if you want to find the actual cap rate of a comparable transaction, you should use the real income (and occupancy) and the real sales price.

Thanks in advance for any input.

Damien