How to Value a Vacant Retail Space?

[Dovid Staples]

Hi BP,

There is a small three tenant retail building in an A location that I've known for a while and noticed the tenants suddenly up and moved out. Not that they went out of business, but pretty much just moved to locations almost next door. For a couple other reasons I strongly suspect the out of state owners aren't managing the place very well anymore and I decided to pursue it.

However, I only know how to value a property based on it's cap rate and operating income. I do not know of a formula or set method to value a vacant property. Is it strictly pro forma? And if so is there some kind of discount you give it since it is vacant?

Thanks for your help BP.