See the value you create by raising rents. Enter current and projected rent, the space, and a market cap rate to estimate forced appreciation.
Estimates only. Assumes the added rent is achievable and net to NOI, and that the market cap rate holds at exit. Real value-add also carries costs and lease-up risk.
Value-add is the strategy of increasing a property's net operating income — through higher rents, better tenants, or reduced expenses — and thereby increasing its value. Because commercial real estate is valued by capitalizing income, even modest NOI gains can create outsized value. This is forced appreciation: value you create through operations rather than waiting for the market.
Enter the square footage, the current rent and your projected rent (per SF per year), and the market cap rate. The calculator computes the added annual NOI and capitalizes it to estimate the value you create.
At a 7% cap rate, every $1 of new annual NOI adds roughly $14 of value. Lower cap rates multiply that effect further. This is exactly the math behind our Rite Aid and Finnegans Plaza repositionings — raise durable income, and value follows.
Commercial property value is income divided by cap rate. Increasing NOI raises the numerator, so value rises by the added NOI divided by the cap rate.
Use a realistic market (exit) cap rate for comparable stabilized properties in your submarket — not an aspirational one.