The property as an economic factor:
Valuing industrial and commercial real estate

January 23, 2022

More than 1 trillion euros – this is the figure estimated for the market value of all industrial and commercial real estate in Germany by the national association of the German real estate industry, ZIA e.V.. Commercial real estate in Germany currently generates sales revenue of 70 to 80 billion euros per year. Commercial real estate thus represents a significant economic factor.



It is not only the size and economic importance that makes the market for commercial real estate so exciting, but also its heterogeneity: the retail space for the baker next door is just as much a part of it as the business park on the outskirts of a small town or the production sites of an internationally active car manufacturer.

As specialists in the valuation of commercial real estate we have good reason to take a look at a few interesting aspects from an appraiser’s point of view.

Transaktionsvolumen Gewerbeimmobilien
Transaction volume in € billion for commercial real estate in Germany, source: 2021 Real Estate Market Report Germany of the Expert Committee for property values (Gutachterausschuss für Grundstückswerte)



To put it short and simple but certainly not wrong: commercial properties are buildings in which – mostly – work is done while residential properties are usually lived in.

Commercial properties include:

Not every real Estate type can be clearly categorized right away. For illustration purposes, think of retirement homes. Here the transition between living and care is very hard to separate thus making it hard to classify.

For example the German Valuation Law relies on an 80/20 rule and defines business property as “land that is used for more than 80 percent of its own or another person’s business or public purposes, calculated by residential and usable floor area…”

Why the term "commercial" is actually wrong for commercial real estate.

In fact, the term “commercial” can lead to misunderstandings. It is often used to refer to “commercial purposes” or “commercially used” to define commercial property. However, this is often incorrect for the following reasons:

  1. In the world of taxation in Germany and other European countries, the term “commercial use” is used when there is income generated from commercial operations. This is also the case, for example, when a company in the legal form of a corporation (i.e. a GmbH or AG) rents out apartments. Nevertheless, apartments remain residential real estate – even if the owner pursues commercial purposes.

  2. You can even become “commercial” as a private owner of apartments that you occupy exclusively yourself. For this purpose, the tax authorities have devised the famous 3-in-5-year rule of thumb: If you sell 3 properties within 5 years, this is considered an indication of your commercial nature.

  3. On the other hand, there are plenty of freelancers, non-profit organizations, or public administrations that do not carry out a trade but do use commercial real estate such as offices, workshops, or studios for their work.

These may be trivialities, but in practice they can cause confusion when commercial property, commercial use or commercial purposes are mentioned and the context is not clear.

Synonyms and alternative definitions

In addition to the term commercial real estate, there are other terms that are used more or less synonymously. For example, we have just mentioned business property, which is also anchored in the German Valuation Law.

The Expert Committees for property values speak of commercial real estate and use it to refer to developed land that serves as a production factor for products or services.

According to this definition, land serving agricultural, forestry or fishing purposes as well as building land are excluded, since here (essentially) the land is the primary asset.

Often, we also speak of company or corporate real estate in order to characterize real estate as part of the value chain of a company, which is also a decisive distinguishing feature for us.

To put it in simple terms, here the real estate serves the same purpose as a hammer, a fork-lift truck or a 5-axis milling machine, namely as a tool to be able to produce.

Different types of commercial real estate

The individual property types among commercial properties differ fundamentally. Therefore, it is important for us as appraisers – as it is for many other players in the market – to further classify the properties in a meaningful way.

In the market reports of the major brokers, for example, real estate for industrial usage and logistics are grouped together. Corporate real estate is most likely to be traded and redeveloped so that it can be used broadly – for example, hall structures that are suitable for both manufacturing and logistics.

This refers to the so-called third-party usability, i.e. the possibility that the property can be used by a third party at a low investment cost. Third-party usability plays a major role in our valuation practice.

The Initiative for Corporate Real Estate subdivides as follows:

Production Real Estate

various industrial halls suitable for various types of production, but also for storage, service, research, and trade.

Warehouse Real Estate

Existing properties with predominantly simple storage facilities, exclusive modern logistics spaces from 10,000 sqm upwards

Business parks

building ensembles created specifically for rental, often with centralized management and shared infrastructure

Transformational Real Estate

are mostly converted and revitalized commercial properties, usually former production facilities or industrial sites with redensification potential

In particular, the distinction between warehousing and logistics real estate is tricky and is handled differently by market participants – depending on their focus.

For us as real estate appraisers, the following approach has proven successful:

In order to value commercial real estate, a deep understanding of the particular business behind the property or the property owner is crucial. Since the individual needs and the corresponding uses are very different and specific, we classify properties according to business models.

The following examples can also be found on our Wagner & Partner website:

Industrial Real Estate

In our valuation process, we interpret the term industrial real estate very narrowly. To be more precise, we use it to refer to real estate that is used for manufacturing, fabrication, and production.

These properties have exciting special features when it comes to valuation. We show which ones.


Despite the impressive market value of probably more than 1 trillion euros in Germany of all industrial and commercial properties, industrial real estate is hardly traded. This is mainly due to the fact that most properties are owner-occupied as corporate real estate. Estimates assume more than 90% owner-occupiers. Some of these buildings are so special and tailored to the needs of the owners that they are hardly usable for third parties. These buildings are therefore hardly traded.

By far the greater part are regular hall buildings used by small to medium-sized companies. Although these are in principle easily tradable, they do not come onto the market either due to the high owner-occupancy rate.

New buildings are also mostly developed and built by the companies for their own long-term needs.

Total sales revenues from 2020 clearly indicate this:

Immobilienumsatz in Mrd. Euro in Deutschland im Jahr 2020

Real estate sales in billion euros in Germany in 2020, source: Real Estate Market Report Germany 2021 of the Expert Committees for property values.

If we take a look at the figures of the Initiative for Corporate Real Estate, they are even considerably lower. Thus, a total turnover of corporate real estate of 2.15 billion euros is indicated for the year 2020. The segment of production real estate, which is even more narrowly defined here, is indicated with a sales volume of less than half a billion.

This perfectly paints a picture of how fundamentally different commercial and industrial real estate can be apprehended.

Umsatz in Mrd. Euro in Deutschland im Jahr 2020 bei Unternehmensimmobilien
Turnover in billion € in Germany in 2020 for corporate real estate, Market Report #13 and #14 of the Corporate Real Estate Initiative

On what occasions do we value industrial real estate?

Another interesting trend over the last few years now is that we also get increasingly commissioned to value industrial real estate. What is the reason for this?

We are seeing growing momentum in four areas of such properties:

Choice of the valuation method for industrial real estate

Choice of the valuation method for industrial real estate

The question of what valuation method to choose is also not easy to answer. Business, economy, industry, production, or company are all terms associated with the generation of income, so it would certainly be obvious to apply the capitalized earnings value method. However, this approach is only suitable if a certain lettability and third-party usability are given.

Many industrial properties are owner-occupied. This usually means that the valuation focuses on technical aspects and construction costs. In this case, the appraiser is more likely to evaluate a property based on the valuation of physical assets.

However, in some cases, suitable comparative data such as rent level comparison, operating costs or production costs are not available. If this is the case, special expertise is necessarily required to determine the value of industrial real estate in particular.

Differentiation from movables and operating equipment

Another challenge in the valuation of industrial properties is the separation of the object to be valued from its inventory or mobile assets.

Sometimes it is the case that foundations for machinery or certain structures of the building are considered to be part of the building and in other cases part of mobile plant equipment, which has significant tax, accounting, and insurance consequences.

In other words, without correct differentiation, it will not be possible to get a correct fair market value.

In German legal documents and regulations, there are only indications, for example in the doctrine of abstract alienation of property (§ 97 ff.) of the German Civil Code (BGB), in the construction standards of DIN 276, or in insurance law. Depending on the intended use, these can also differ from one another.

Our partner Merker Industriebewertungen has published a readable article in ASS Compact about the insurance-related delimitation.

Once the question of differentiation has been answered, the concrete valuation of the operating equipment belonging to the building remains a challenge. Here, there is regularly a lack of standard sources, for example for the production and construction costs.

Through our partner Merker Industriebewertungen we are able to provide you with a comprehensive appraisal of your machinery and technical equipment that perfectly suites your needs and requirements.

Weitere Herausforderungen bei der Bewertung von Industrieobjekten

The surveyor may deal with further difficulties and challenges when calculating the fair market value for industrial real estate. Exemplary and by no means conclusive are to be mentioned:

Final Remarks

Commercial real estate includes a large number of very different types of property, which by no means belong in the same category for valuation purposes. For example, Industrial properties have the special feature that they are often used exclusively by their owners. Those properties can be highly specialized and are therefore rarely traded. The reasons for a valuation of such property are usually because of financing requirements or for the balance sheet.

Accordingly, the appraiser for commercial and industrial real estate must demonstrate special expertise – even beyond the actual property itself.

If you need someone who owns the skillset to value commercial property within the European Union, please do not hesitate to contact us. 

Contact Form

Klaus Wagner, Telephone +49 40 2271 6752

In the past, we have frequently valued various commercial properties for companies.
Machinery and equipment
We cooperate with the expert office Merker Industriebewertungen for the valuation of machinery and equipment.
We focus on real estate appraisals that are relevant to our clients and their real estate portfolios.
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