The three approaches to value
Commercial property in BC is valued with the same three approaches appraisers use across Canada. BC's Property Assessment Appeal Board summarizes them in its commercial appeal guide (Property Assessment Appeal Board):
- Income approach. Value is based on what the property earns: net operating income divided by a capitalization rate. This is the main method for leased investment property such as multi-tenant industrial, retail plazas, office buildings and apartment buildings.
- Direct comparison approach. Value is based on recent sales of similar properties, adjusted for differences in location, size, condition and timing. It carries the most weight for owner-occupied buildings, strata units and land.
- Cost approach. Value is land value plus the depreciated replacement cost of the improvements. The appeal board notes it is less useful for income-producing property; it matters most for new, special-purpose or rarely traded buildings.
A full appraisal usually works through more than one approach and then reconciles them. A lender's appraisal guide for multi-unit properties, for example, expects direct comparison, income and cost approaches to be addressed, with an explanation where one does not apply (MCAP).
NOI and cap rates: the core arithmetic
The income approach rests on one formula: value = net operating income ÷ capitalization rate. The appeal board describes net operating income (NOI) as gross operating income minus a vacancy allowance and expense allowances.
- Start with rent. Use actual lease rents, checked against market rent for comparable space. Note whether each lease is net (tenant pays taxes, insurance and maintenance) or gross (landlord pays them). The differences are explained in commercial lease types in BC.
- Add other income such as parking, signage or recovered operating costs.
- Deduct a vacancy and credit-loss allowance, even if the building is full today.
- Deduct operating expenses the landlord actually bears: unrecovered property tax, insurance, repairs, management and a reserve for structural items. Mortgage payments, income tax and depreciation are not operating expenses.
- Divide NOI by a market cap rate drawn from sales of comparable properties.
Illustrative arithmetic only (not market data): a building with $200,000 of NOI valued at a 6.0% cap rate implies $200,000 ÷ 0.060 = about $3.33 million. At 6.5% the same NOI implies about $3.08 million. A half-point change in cap rate moves value by roughly 8% here, which is why buyers and sellers argue about the rate as much as the income.
Two points often trip up owners. First, investors capitalize stabilized income, so above-market rents near expiry, a large vacancy or a tenant on a short term all reduce value even if this year's cheque is fine. Second, lease quality matters: remaining term, tenant covenant, renewal options and who pays for the roof and structure all feed into the cap rate a buyer will accept.
Units of comparison by property type
Alongside cap rates, the market prices each property type with a unit that lets unlike properties be compared. These units are shortcuts for screening comparables, not a substitute for income analysis.
| Property type | Common unit | What drives the number |
|---|---|---|
| Industrial / warehouse | Price per sq ft of building; land per acre | Clear height, loading, yard, power, site coverage, zoning |
| Office | Price per sq ft | Building class, vacancy, lease terms, parking, transit access |
| Retail | Price per sq ft; cap rate on in-place income | Anchor tenants, traffic, frontage, tenant mix, lease terms |
| Apartment buildings | Price per door (suite); cap rate | Rents versus market, suite mix, building age, capital needs |
| Hotels / motels | Price per key (room); multiple of income | Occupancy, average daily rate, brand, operating business |
| Development land | Per acre, per sq ft of land, or per buildable sq ft | OCP designation, zoning, density, servicing, charges |
| Strata commercial units | Price per sq ft | Size, use restrictions, strata fees and bylaws, parking |
Example of a published per-square-foot figure: Altus Group reported a Vancouver office property selling for about $868 per sq ft ($6.3 million) in June 2026 (Altus Group, Vancouver update Q2 2026). A single sale is not a benchmark; appraisers adjust several comparables to the subject. For land specifically, see selling development land in BC.
Published cap-rate ranges for BC markets
CBRE publishes a quarterly Canadian cap rate survey that includes Vancouver and Victoria. The ranges below are from its Q2 2026 edition, where every Vancouver range listed here was unchanged from the prior quarter (CBRE, Canadian Cap Rates & Investment Insights Q2 2026). CBRE does not publish Okanagan or other interior ranges. In its own table, Victoria ranges sit at or above Vancouver's for most property types; in the Okanagan, cap-rate evidence comes from local sales and needs to be gathered property by property.
| Property type (CBRE Q2 2026) | Vancouver | Victoria |
|---|---|---|
| Industrial, class A | 4.50%–5.25% | 5.00%–5.50% |
| Industrial, class B | 4.75%–5.25% | 5.25%–6.00% |
| Downtown office, class A | 5.50%–6.25% | 6.50%–7.00% |
| Suburban office, class A | 6.25%–6.75% | 6.25%–6.75% |
| Retail, neighbourhood | 5.25%–5.75% | 5.00%–5.75% |
| Multi-family, low-rise class A | 3.50%–4.75% | 4.50%–5.00% |
| Hotel, suburban limited service | 7.00%–8.50% | 8.75%–9.75% |
The same survey put the national all-property average at 6.58% in Q2 2026. Survey ranges describe typical institutional-quality assets; a specific property can sit outside them.
What moves cap rates
- Interest rates and bond yields. Buyers compare property yields with safer alternatives. CBRE reported the Q2 2026 national cap rate spread to the 10-year Government of Canada bond yield at 320 basis points. The Bank of Canada held its policy rate at 2.25% at its September 2, 2026 decision (Bank of Canada). Financing terms are covered in financing commercial property in BC.
- Market rent outlook. If rents are expected to rise, buyers accept a lower initial yield; if vacancy is climbing, they want a higher one. Current BC vacancy and rent figures are in the 2026 market overview.
- Tenant and lease quality. A long lease to a strong national tenant supports a lower cap rate than short leases to local start-ups.
- Building age and capital needs. Deferred roof, HVAC or envelope work is either priced into a higher cap rate or deducted from the price.
- Location and liquidity. Deep markets with many buyers, such as Metro Vancouver industrial, trade at lower cap rates than thinly traded towns or specialised buildings.
- Redevelopment potential. Where zoning allows much more density than exists, land value can exceed the income value, and the cap rate on current income stops being the right lens.
BC Assessment value versus market value
BC Assessment estimates the value of most properties as of July 1 of the year before the assessment roll, and the physical condition and use as of October 31 (BC Assessment; Property Assessment Appeal Board). It uses mass appraisal: analyzing all sales in an area to develop common units of comparison, then applying them across many properties (BC Assessment). For commercial property this often means typical rents, vacancy and cap rates rather than the actual leases in your building.
That makes an assessment a reasonable starting reference for property tax, but a poor pricing tool. It is already months old when the notice arrives, it may not reflect your lease terms, and it cannot see redevelopment potential or deferred maintenance the way a buyer will. Owners who think an assessment is wrong can ask BC Assessment to review it; the deadline to file a formal complaint with the Property Assessment Review Panel is normally January 31 (BC Assessment, About Appeals).
REALTOR® opinion of value versus AACI appraisal
These are different products for different purposes.
- REALTOR® opinion of valueA comparative market analysis prepared to help set a list price or offer strategy, based on comparable sales, listings and income. It is not an appraisal and is not addressed to a lender or a court.
- AACI appraisalAn independent report by an Accredited Appraiser Canadian Institute member. The Appraisal Institute of Canada says AACI holders are qualified for residential, commercial, industrial, institutional, agricultural, land and special-use property, working under the CUSPAP standards (Appraisal Institute of Canada).
Lenders generally require an appraisal for commercial mortgages; MCAP, for instance, requires an independent AACI appraiser for multi-unit loans. An appraisal is also the right tool for estate and tax filings, partner buy-outs, expropriation and litigation. For a sale, many owners use both: an opinion of value to plan marketing, and an appraisal where a lender, partner or accountant needs one.
Greenhouses, licensed cannabis facilities and other special-purpose buildings have few comparable sales and a large cost component. The sister site covers that case in valuing a cannabis facility.
How Commercial Real Estate Group can help
Sean Phillips, REALTOR® with Coldwell Banker Executives Realty, prepares opinions of value and comparative market analyses for commercial property anywhere in BC, and can refer owners to AACI appraisers when an appraisal is required. Start with a free 10-minute Zoom intro, or see paid advisory, quoted per property.