How to Analyze CRE Comps in 5 Steps

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Aug 18

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Want to figure out the right value for a commercial property? Analyzing comparable properties (or "comps") is the key. Whether you're buying, selling, or financing, comparing similar properties in your market helps you make informed decisions and avoid costly mistakes. Here's a quick summary of the 5 steps to analyze CRE comps:

Understand Your Subject Property: Gather all property details like size, type, age, lease terms, and unique features. Back it up with documents like rent rolls and operating statements.
Find Comparable Properties: Look for recent sales in the same location and with similar features. Use tools to filter for the most relevant data.
Standardize Data: Convert sale prices and lease rates into consistent units, like price per square foot, for accurate comparisons.
Adjust for Differences: Account for variations in location, size, condition, and other factors to align comps with your property.
Estimate Final Value: Use adjusted values to calculate a range and a weighted average for a realistic property valuation.

A Sample Walkthrough of Building a Sales Comparison Grid

Step 1: Know Your Subject Property

To accurately compare your property to others, you need a clear and detailed understanding of what you're working with. This initial step lays the groundwork for all future adjustments and calculations. The better your starting data, the more dependable your final valuation will be.

Document Property Details

Start by gathering the essential details about your property. Note the property type - whether it's office, retail, industrial, or multifamily - along with the full address and total square footage. Use U.S. standard units, with square feet for area and dollars per square foot for pricing.

Include the year built and the property’s class designation (A, B, or C). These elements are key to finding comparable properties. For instance, a Class A office building constructed in 2018 will require a different set of comparables than a Class C property from 1985. Also, specify the ownership interest type - fee simple or leased fee - as this affects valuation and the type of comparables you'll need to analyze ^[2].

Look at lease structures and tenant details as well. Record average lease terms, current rental rates (in dollars per square foot), and whether the leases are gross, net, or triple net. For example, a multi-tenant office building might have 7-year leases at $28 per square foot NNN, with a tenant mix of legal and tech companies maintaining 95% occupancy.

Don’t forget physical features and amenities that make your property stand out. This could include parking ratios (e.g., spaces per 1,000 square feet), on-site amenities like fitness centers or conference rooms, and unique features such as waterfront views or a historic designation. These details are critical when comparing your property to others and making adjustments.

Once you’ve noted these details, it’s time to back them up with documentation.

Collect Supporting Documents

The next step is to gather documents that verify and support your property details. Key documents include rent rolls and operating statements, which provide insights into tenant occupancy, lease rates, and expiration schedules. Operating statements also reveal annual income and expenses, helping you determine whether your property is performing above or below market standards.

Include records of recent capital improvements, such as major renovations, system upgrades, or energy-efficient installations. For instance, a roof replacement in 2020 or an HVAC upgrade in 2022 can impact your property’s value by reducing operating costs or attracting higher-quality tenants. These improvements are important when selecting and adjusting comparables ^[1].

Watch out for common mistakes like missing or outdated operating statements, inconsistent measurement units, or overlooked recent improvements. To ensure your data reflects current market conditions, aim to collect information from the last six months ^[1]^[2].

For those looking to simplify this process, tools like The Fractional Analyst can help. Their CoreCast platform offers financial analysis and standardized data collection tools, along with expert underwriting and market research support. This ensures all relevant details are captured using best practices, reducing the risk of incomplete or inaccurate documentation.

A complete subject property profile might include details like: 18,500 square feet of multi-tenant office space built in 2002, generating $520,000 in annual net operating income with $120,000 in annual expenses, featuring 75 on-site parking spaces and a recently renovated lobby. By assembling this level of detail, you create a solid foundation for analyzing comparable properties and refining your final valuation.

Step 2: Find and Choose Comparable Properties

Once you’ve gathered all the details about your subject property, the next step is identifying comparable properties that closely match its key features. The accuracy of your valuation heavily depends on the quality of these comparables, so it’s essential to focus on timing, location, and property characteristics. Here’s how to identify relevant market transactions to use as benchmarks.

Look for Recent Sales

Start by filtering for sales that occurred within the past 6–12 months to ensure your data reflects current market trends^[3]^[1]^[2]. Market conditions can influence this timeframe - if the market is growing quickly, use a shorter window, but in slower or stable periods, you can extend the range or adjust how much weight you give to older transactions^[4].

Proximity is also key. Begin your search in the same submarket or neighborhood as your subject property, and only expand outward if you need more examples. For instance, if a 10,000-square-foot office building in downtown Dallas sold for $2.5 million in March 2025, it would make a strong comparable for a similarly sized office building in the same area, assuming their features align.

Ownership interest is another critical factor. Fee simple and leasehold properties are valued differently, so it’s important to match the ownership structure. For example, if your subject property is fee simple, prioritize fee simple transactions over leasehold ones whenever possible^[2].

Finally, make sure the comparables match your subject property’s class designation. A Class A office building should be compared to other Class A properties, while a Class C industrial property needs comparables from the same grade. Mixing property classes can complicate your analysis and reduce confidence in your valuation.

Use Tools for Better Selection

Modern platforms, like CoreCast by The Fractional Analyst, simplify the process of finding high-quality comparables. These tools let you filter properties by criteria such as type, size, location, and transaction date, making it easier to pinpoint relevant sales without manually sifting through data.

When using these platforms, start with conservative filters. For example, limit your search to properties within 5 miles of your subject property, then expand the radius if you don’t find enough matches. Similarly, for property size, begin with buildings within 20% of your subject’s square footage. For instance, if you’re analyzing a 20,000-square-foot warehouse, start by comparing it to properties between 16,000 and 24,000 square feet.

Here’s a quick reference guide for narrowing down your comparables:

Selection Criteria	Ideal Range	When to Expand
Transaction Date	Past 6–12 months	Up to 24 months in slower markets
Location	Same submarket	Expand to nearby submarkets if data is limited
Property Size	Within 20% of subject	Up to 50% if few comps are available
Property Class	Exact match (A, B, or C)	Adjust for one class difference as needed

It’s important to document your search process and the criteria you used to select comparables. This transparency can be invaluable when presenting your analysis to clients, lenders, or investors who may want to understand your methodology.

Platforms like CoreCast by The Fractional Analyst can be especially helpful, offering tools for both self-directed analysis and expert support. Their financial models and market research resources provide flexibility, whether you’re conducting the analysis on your own or working with a professional team.

Since perfect comparables are rare, you’ll likely need to adjust for differences in factors like location, size, age, or amenities to ensure your benchmarks are as accurate as possible.

Step 3: Collect and Standardize Key Data

Once you've selected your comparables, it's time to gather detailed transaction data and convert it into standardized units. This step is crucial for ensuring accurate, side-by-side comparisons that will underpin your valuation analysis.

Record Transaction Information

Start by documenting key details for each comparable. This includes the sale price (or lease rate), transaction date (formatted as MM/DD/YYYY), deal terms, financing conditions, and any concessions that may have impacted the final price ^[3]^[4]. Be specific about whether the recorded price represents the full purchase or includes allocations to other assets. For instance, a property sold on June 15, 2025, would be recorded as 06/15/2025 for consistency ^[5].

Don’t overlook concessions like tenant improvement allowances, free rent periods, or seller-paid closing costs. For example, if a property sold for $2,500,000 but included a $100,000 tenant improvement concession, the effective sale price (after accounting for the concession) should be noted for an accurate analysis ^[3]^[4].

Once all relevant details are captured, the next step is to standardize the data for consistent and meaningful comparisons.

Standardize Data for Comparison

To ensure your analysis is accurate, convert all transaction details into consistent units. In U.S. commercial real estate, sale values are typically expressed as price per square foot ($/ft²), while lease rates are shown as price per square foot per year ^[5]^[4]. For example, if a 10,000-square-foot building sold for $2,500,000, the price would standardize to $250.00 per square foot.

If you encounter properties measured in units other than square feet, convert them accordingly. Clearly document your conversion methods and any assumptions made during this process. Adjust for concessions and special terms by assigning them an estimated dollar value. For instance, an entry might read, "Free rent: 6 months ($15,000 value)" to ensure these factors are transparently accounted for.

Additionally, distinguish between fee simple and leasehold transactions, as these require different valuation methodologies ^[2]. Tools like CoreCast by The Fractional Analyst can help simplify this process by automatically formatting your data and offering templates to organize transaction details ^[5].

Be sure to document the sources for every data point. This transparency not only strengthens the credibility of your analysis but also helps when presenting your findings to clients or lenders.

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Step 4: Adjust for Property Differences

Now that you've standardized your data from Step 3, it's time to account for the unique characteristics of each property. The goal here is to make adjustments that align each comparable property with the traits of your subject property.

Identify Key Differences

Start by comparing your subject property to each comparable across several critical factors: location, condition, size, tenant quality, and zoning.

Location often has the biggest impact on value. For instance, a property right on Main Street can command a significantly higher price per square foot than one a few blocks away. Be sure to document location-specific advantages or drawbacks, such as proximity to highways, public transit, or major tenants.
Condition and age also play a major role. A newly renovated office building will typically fetch higher rents than one with outdated features like 1980s carpeting. Take note of specific details, such as the age of the HVAC system, roof condition, parking availability, or building amenities. For retail properties, elements like storefront visibility, signage, and customer parking are especially important.
Size matters because larger properties often sell for less per square foot due to economies of scale. For example, a 5,000-square-foot building may sell for $200 per square foot, while a 50,000-square-foot property might sell for $175 per square foot.
Tenant quality and lease terms directly affect value, as stable, long-term tenants can make a property more appealing.
Zoning and development rights can also influence pricing. If a comparable property has more flexible zoning or additional development potential, it may have sold at a premium that doesn’t apply to your subject property.

Quantify Dollar Adjustments

After identifying the differences, the next step is to calculate how much each factor affects the value. Use local market data and construction costs to make these adjustments as precise as possible.

For condition differences, consider renovation or replacement costs. For instance, if a comparable has a new $50,000 HVAC system that your subject property lacks, you might adjust its price by $5.00 per square foot for a 10,000-square-foot building.
Location adjustments are often based on rental rate differences. If properties in the subject’s area typically rent for $2.00 per square foot less than those in the comparable’s location, you can use market cap rates to convert that rental difference into a value adjustment.
For size differences, research how pricing varies by building size in your market. For example, properties under 10,000 square feet might sell at a 10% premium compared to larger buildings.
Age and condition adjustments can be calculated using depreciation schedules or actual renovation costs. If updating a comparable to match your subject property’s condition would cost $15 per square foot, that becomes your upward adjustment.

Clearly document your reasoning for each adjustment. This is essential when presenting your findings to clients or lenders who may question your methodology.

Use an Adjustments Table

To keep your analysis transparent and easy to follow, organize your adjustments in a table. This allows stakeholders to see exactly how you arrived at your conclusions.

Comparable	Original $/SF	Location	Condition	Size	Age	Other	Adjusted $/SF
123 Oak St	$185.00	+$10.00	-$5.00	$0.00	-$8.00	+$3.00	$185.00
456 Elm Ave	$195.00	-$15.00	+$12.00	+$5.00	$0.00	-$2.00	$195.00
789 Main St	$210.00	-$25.00	$0.00	+$8.00	-$3.00	$0.00	$190.00

Below the table, explain your major adjustments. For instance, you might note that the location adjustment for 789 Main Street reflects its downtown premium compared to your subject property’s suburban location. This level of detail is critical for building trust in your analysis.

Keep in mind that adjustments exceeding 20-25% of the original sale price could indicate that the property isn’t truly comparable. If you find yourself making excessive adjustments, it might be better to look for more suitable comparables. Once you’ve finalized your adjusted values, you’ll be ready to move on to estimating the final value in the next step.

Step 5: Calculate Final Value Estimate

This step brings together all your earlier analyses to arrive at a final market value estimate. Using the adjusted figures from Step 4, you’ll use careful analysis and informed judgment to determine a value that’s both reasonable and well-supported.

Review Adjusted Values

Begin by reviewing the range of your adjusted values. Look for any outliers or patterns that might need further investigation. If there’s a large gap between the highest and lowest adjusted values, it’s worth digging deeper to see if additional adjustments are necessary or if one of the comparables should be excluded.

To spot potential issues, calculate basic statistics like the mean, median, and range. For example, if your adjusted comparables show values of $185.00, $190.00, and $195.00 per square foot, the mean and median are both $190.00, with a range of $10.00. A narrow range like this suggests consistency in the market, while a wider range could signal volatility or the need for better comparables.

Pay attention to any clustering in the data. For instance, if two comparables are close in value, say $188–$192 per square foot, but a third sits at $205 per square foot, the outlier might warrant less influence in your final calculation. Be sure to document your reasoning for including or excluding any outliers.

Also, consider how current your data is. If a sale occurred six months ago, you might need to adjust for market changes, especially in dynamic markets. A typical guideline is to apply a monthly adjustment of 0.5% to 1.0% for appreciation or depreciation, though this varies by location and property type.

Once you’ve refined your figures, assign appropriate weights to each comparable.

Weight Your Comparables

Assigning weights is crucial to ensure your final estimate reflects the most reliable data. Focus on three key factors: similarity, recency, and data quality.

Similarity: Comparables requiring fewer adjustments (less than 10% of the original sale price) should carry more weight. For example, if one property needed $8.00 per square foot in adjustments and another needed $25.00, the first is more similar and should have a greater influence.
Recency: Recent sales provide a clearer picture of the current market. A sale from two months ago is likely more relevant than one from eight months ago.
Data Quality: The reliability of your data matters. Sales with complete records, such as verified closing statements or broker reports, should weigh more heavily than those based on limited public data.

After assigning weights based on these factors, calculate a weighted average value. This will serve as the foundation for your final estimate.

Create Final Value Report

Now, compile your findings into a professional report. Start with an executive summary that clearly states your final value estimate, followed by a detailed breakdown of your analysis.

The report should include:

A description of the subject property
A market overview
A comparables analysis
A summary of adjustments
The final value conclusion

Instead of providing a single number, present a value range. For instance, you might conclude that the property is worth $188–$194 per square foot, with a point estimate of $191 per square foot. This approach acknowledges potential uncertainties while offering clear guidance.

Include supporting documents like maps showing comparable locations, adjustment calculations, and data sources. This level of transparency not only strengthens your credibility but also makes it easier for others to understand and verify your work.

Finally, document any limitations or assumptions. For example, note if comparable sales data was scarce, if market conditions shifted during your analysis, or if unique property features couldn’t be fully accounted for. Being upfront about these factors helps set realistic expectations and protects your analysis from undue criticism.

Your final value estimate should combine the quantitative insights from your data with your professional judgment. This blend of rigorous analysis and market expertise ensures a reliable valuation for commercial real estate decisions.

Conclusion: Key Points for CRE Professionals

Breaking down commercial real estate comparables becomes much simpler when you follow a clear, structured process. The five-step approach discussed here offers a practical framework to transform market data into actionable property valuations.

Start by thoroughly understanding your subject property and ensuring all data is consistent. This groundwork is crucial - it not only keeps your comparisons accurate but also helps you avoid costly errors and wasted time later on.

When it comes to selecting comparables, quality always trumps quantity. Prioritize recent, similar transactions over a larger dataset that requires extensive adjustments. It’s better to focus on fewer, well-matched transactions that align closely with your property than to dilute your analysis with irrelevant data.

Standardizing your data is another critical step. Even small mistakes at this stage can snowball, throwing off your entire analysis. Precision here lays the foundation for reliable outcomes.

Adjustments demand both careful analysis and a solid understanding of the market. While calculations are important, they’re only part of the equation. Local market trends, buyer behaviors, and unique property features - like a prime location or functional limitations - can influence value in ways that go beyond formulas. These nuanced adjustments are where your expertise shines, leading to a confident and credible valuation.

Your final estimate should balance confidence in your methodology with an awareness of market uncertainties. Presenting a value range instead of a single figure not only reflects professionalism but also gives room for flexibility in decision-making.

For those managing multiple valuations or tight deadlines, technology can be a game-changer. Tools like CoreCast, developed by The Fractional Analyst, simplify time-consuming tasks like data collection and standardization. This platform helps professionals save hours of manual effort, ensuring consistent and dependable analysis - perfect for staying efficient while delivering high-quality results.

FAQs

What are the key property features to consider when choosing commercial real estate comparables?

When choosing comparable properties, it's crucial to zero in on key factors that influence value. These include location, property type, size, physical features, and the market conditions at the time of sale. For instance, properties within the same neighborhood or market area that share similar square footage, amenities, and usage types (like retail, office, or industrial) typically make the best comparisons.

To fine-tune your evaluation, account for differences in price per square foot, age, condition, or standout features such as parking availability or zoning. This approach ensures you're making fair comparisons, giving you a clearer picture of a property's value. If you need extra guidance, tools like those from The Fractional Analyst can simplify the process and provide tailored insights to meet your specific needs.

What mistakes should I avoid when standardizing data for CRE comps analysis?

When working on commercial real estate (CRE) comps analysis, there are a few pitfalls to watch out for that can throw off your results:

Selecting mismatched properties: Properties that vary too much in location, size, or condition can skew your valuation and lead to unreliable conclusions.
Ignoring necessary adjustments: Failing to account for differences in features, market trends, or the timing of sales can distort your analysis.
Neglecting data consistency: Using inconsistent or irrelevant data can compromise the accuracy of your findings.

To achieve better results, focus on picking comparable properties wisely and make thoughtful adjustments to account for key differences. This approach will help you produce a more precise and reliable analysis.

How can I make sure my property valuation is accurate and reflects the current market?

To make sure your property valuation is precise and matches current market conditions, begin by collecting dependable, up-to-date market information. You can use methods like the income capitalization approach (calculating by dividing net operating income by a cap rate), the cost approach, or the sales comparison method to cross-check your findings.

Providing appraisers or analysts with comprehensive property details and recent comparable sales data can improve the accuracy of the valuation. It's also a good idea to keep an eye on market trends and refresh your data sources regularly to ensure your valuation reflects the latest market shifts.