@Zach Kirkton From my experience in commercial real estate, there are two main factors that you want to consider when determining a properties value: the strength of the leases, and how easy would it be to place a new tenant.
Regarding the leases, long-term (5-15yr) leases are best to minimize tenant turn-over (with commercial it can take longer to fill vacancies with businesses as it does with a residential tenant). There should be ample time remaining on the lease at time of purchase. Does the current tenant have options for renewal, and are there rent bumps? And most of all is the lease NNN. This ties directly into what you can expect your NOI to be, give you protection against rising property taxes, utility costs, and repairs since the tenants will be responsible for those costs in a NNN lease. If the current leases are modified-gross or gross-leases, then you as the owner will be responsible for all those costs and need to adjust your rental rate accordingly.
For tenant replacement, the more specialized/specific use the property is (former supermarket, movie theater, manufacturing) the longer it will take to fill with a new tenant. In contrast, if the property can easily accommodate a wide variety of tenant business with little reconfiguration, this will make filling vacancies easy. For example if it's an industrial space with loading docks, built-in machines, and large open floor plan used for a very specific purpose, once that tenant leaves the space is really only ideal for whatever type of business was operating. In order for another business type to come in, it would require significant remodeling if it's not a similar manufacturing business. Also along those lines, be aware of any potential ground contamination that you may be liable for if it's an industrial property. This is most important so be sure to heavily research oil tanks, prior uses for anything automotive, dumping, processing, etc.
However, if it's a property that isn't highly specific to any particular use, and the structure can ideally become an empty shell, these can easily be converted for retail, medical/dental, professional office, learning center/daycare, and the like. When a tenant leaves, the configuration they leave it in has the highest chance of being suitable for the next tenant with minimal construction. Or if it can be cleared into an empty shell, it's easy to put up partitioning walls and potentially convert the property from a one tenant building into a two or three tenant building, diversifying your income streams, and drastically enhancing your property valuation. This is the most powerful element of commercial real estate - minor changes in tenants and rents has a significant effect on the property's cap rate valuation among other metrics.
Lastly, for comps with commercial properties, it's a little bit more tricky than with residential, since each property has its unique uses. Start with determining what the going commercial rental rate/SF is for the area with currently available properties, are they typically NNN, modified-net, or gross leases, current vacancies with other surrounding commercial properties, and if there are other similar-use properties in the area. If there are no other commercial spaces like it in the area, and not a lot of available space, that builds intrinsic value to the property and can mean strong leasing. If the property can be easily converted into another unmet use in the area, that's a great value-add potential.
Hope this helps a little!
