Commercial valuation

How to value: Warehouse and industrial

A warehouse is valued differently depending on whether it earns rent for an investor or will be used by the buyer’s own business. A rented building is valued mostly from its income. A building you will use yourself is valued mostly from recent sales of similar buildings.

Tall yellow and gray storage racks hold wrapped pallets of boxes inside a large warehouse with an open steel roof. — Photo: Shopify Partners, Burst (Burst Some Rights Reserved)

Main method
Income approach (rented), direct comparison (own use)
Check first
The tenants and the time left on leases
Watch out for
Contamination and zoning

Timing and the market The value of this type changes with the time and the market mood. Every number below is a made-up example, not a real market number.

How this type is valued

A rented building: the income approach is the main method. Take the rent, subtract the costs the owner pays, and divide the result (net operating income, NOI) by the cap rate. With the same rent, a different cap rate gives a very different value.

A building for your own use (owner-user): the direct comparison approach is the main method. Look at what similar buildings nearby recently sold for, shown as a price per square foot. But if clear height, number of loading docks or lot size differ, price per square foot alone is hard to compare.

A tax assessment is not the same as market value. MPAC (Ontario’s property assessment agency) says it uses the cost approach (the cost to rebuild, minus wear and age, plus the value of the land) for general-purpose industrial properties and warehousing. And a property tax assessment is the value on a set valuation date. Do not treat it as today’s selling price.

What drives the value

Clear height (the usable height from the floor to the lowest ceiling fixture): taller space lets goods be stacked higher, so it is usually preferred.
The number and position of loading docks (raised doors where goods come off a truck) and drive-in doors (doors where trucks or forklifts enter at floor level).
Space on the lot for trucks to turn, parking, and how close the building is to a highway.
Electrical capacity, how much weight the floor can carry, and fire protection such as sprinklers.
The share of office space: too much office space leaves less room for storage.
The tenant’s credit, how long the lease has left, and the gap between the current rent and market rent (for a rented building).
Whether the roof, floor or docks need big repairs soon.

Documents and numbers to check

The current leases and a rent roll (a table of each tenant’s rent and lease term).
Operating costs for the last 2 to 3 years: property tax, insurance, and the building costs the owner pays.
The property tax bill and the MPAC property class.
The exact area: whether the leased area matches the measured area (plans, survey).
A building condition report: roof, floor, docks, electrical, heating.
An environmental review (Phase I), especially if the site had manufacturing, oil or chemicals.
Whether the zoning allows the business you plan to run.

What to watch out for

Rent set above the market, which inflates the value: when the lease ends, the rent may come down.
Income that depends on one tenant, or leases that are short.
Soil or groundwater contamination from past use. Finding out later can be very costly.
A planned use that the zoning does not allow.
Relying on the seller’s own area figures. Check them yourself.

A made-up example: the same building, a different value as the market mood changes

These numbers are made up to show the arithmetic. They are not real market cap rates or prices. The example is one 12,000 sq ft warehouse leased on a net lease (the tenant pays property tax and building costs). The owner’s own costs are set at $10,000 a year. Rent is set at $180,000 a year.

A made-up example: the same building, a different value as the market mood changes
Cap rate	Net operating income (NOI)	Value	Per sq ft
5.0%	$170,000	$3,400,000	about $283
6.0%	$170,000	$2,833,333	about $236
7.0%	$170,000	$2,428,571	about $202

What changes with timing and the market

When interest rates rise, the return investors ask for (the cap rate) tends to rise too, so a building with the same rent can be valued lower. The opposite can also happen. (This is a general principle, not a rule.)
When many units are empty, tenants can negotiate rent and perks (such as free rent months) more easily, so a building’s income may fall.
Areas with a lot of new supply can affect the rents and values of older buildings.
How owner-users see loan rates and their business outlook changes how many buyers want the same building.
So do not treat a price from a few months ago as today’s value. Check the latest market reports and recent sales of similar buildings together.

Where to check the market →

Official sources

What the official sources say 7

MPAC, Industrial property assessmentsIndustrial property assessments

We use the cost approach to assess the value of most general-purpose industrial properties.

In plain wordsMPAC says it uses the cost approach in property tax assessments for most general-purpose industrial properties. This is a tax assessment method and can differ from how a market selling price is set.

Source: mpac.ca/en/PropertyTypes/IndustrialPropertyAssessments · checked Nov 2, 2026

MPAC, Three Approaches to ValueThree Approaches to Value

The valuation approach we use depends on a number of factors including property type, and the number of recent comparable sales of similar properties in the area.

In plain wordsWhich method is used (direct comparison, income, or cost) depends on the kind of property and how many recent comparable sales there are. This page says MPAC uses the income approach for income-producing buildings. This is the property tax assessment method. It is similar to, but not the same as, how a market price is set.

Source: mpac.ca/en/UnderstandingYourAssessment/ThreeApproachesValue · checked Oct 30, 2026

Ontario, Property taxProperty tax — Property assessments

Property assessments are based on the current value of properties as of a legislated valuation date, which is currently January 1, 2016.

In plain wordsA property tax assessment is the value on a date set by law. On this page, checked October 30, 2026, that date is January 1, 2016. It can differ from what the property would sell for in today’s market.

Source: ontario.ca/page/property-tax · checked Oct 30, 2026

Environmental Protection Act (Ontario) — Phase one environmental site assessmentR.S.O. 1990, c. E.19, s. 168.1

“phase one environmental site assessment” means an assessment of property conducted in accordance with the regulations by or under the supervision of a qualified person to determine the likelihood that one or more contaminants have affected any land or water on, in or under the property;

In plain wordsA Phase I environmental assessment is a review by a qualified person, using records and a site visit, of how likely it is that the land or water has been contaminated. It is also where the need for a Phase II study (which tests for contamination) is decided.

Source: ontario.ca/laws/statute/90e19 · checked Nov 2, 2026

Environmental Protection Act (Ontario) — Record of Site ConditionR.S.O. 1990, c. E.19, s. 168.3.1 (1)

Subject to subsection (2), a person shall not, (a) change the use of a property from industrial or commercial use to residential or parkland use; (b) change the use of a property in a manner prescribed by the regulations; or (c) construct a building if the building will be used in connection with a change of use that is prohibited by clause (a) or (b).

In plain wordsTo change land from industrial or commercial use to residential or parkland use, a Record of Site Condition (RSC) must first be filed for the property (apart from the exceptions in subsection (2) of the same section). It is not required for every purchase. It matters most for old factory, repair shop, gas station or dry cleaner sites you plan to change to another use.

Source: ontario.ca/laws/statute/90e19 · checked Nov 2, 2026

Land Transfer Tax Act (Ontario)R.S.O. 1990, c. L.6, s. 2 (1)

(iv) 2 per cent of the value of the consideration that exceeds $400,000; and

In plain wordsOntario land transfer tax is paid when the transfer of land is registered, and the part of the price above $400,000 is taxed at 2%. The extra 0.5% in the same section applies only to land with one or two single family residences, so for commercial and industrial land this 2% is the highest bracket. Toronto also has its own municipal land transfer tax, so ask a lawyer.

Source: ontario.ca/laws/statute/90l06 · checked Oct 30, 2026

Excise Tax Act, Schedule V, Part I — exempt supplies of real propertyExcise Tax Act, Sched. V, Part I, s. 2

A particular supply by way of sale of a residential complex or an interest in a residential complex made by a particular person who is not a builder of the complex or, if the complex is a multiple unit residential complex, an addition to the complex, unless

In plain wordsThe exempt list includes the sale of a residential complex by someone who is not its builder. A sale of a commercial or industrial building or land does not fall under this item, so HST often applies. It depends on whether the seller is an HST registrant and how the buyer reports it, so check with an accountant.

Source: laws-lois.justice.gc.ca/eng/acts/E-15/page-120.html · checked Oct 30, 2026

FAQ

Can I just compare the price per square foot?

It is a good starting point, but it is not enough. Even in the same area, clear height, number of docks, lot size and lease status change what a price per square foot means. Compare sales with similar features where you can, and get an appraiser’s opinion.

Is the MPAC assessed value the market price?

No. An MPAC assessment is used to set property tax, and it is the value on a fixed valuation date. As of October 30, 2026, the Ontario government page says that date is January 1, 2016. It can differ from what the property would sell for in the market today.

Is an owner-user building valued differently from an investment building?

Yes. An investment building is valued mostly from income and the cap rate. A building for your own use is valued mostly from recent sales of similar buildings. If you may rent it out or sell it later, it also helps to run the income numbers once.

Shall we look at the building you are considering?

Tell me about the property or business you are looking at and I will explain how it is valued and what to check first. A formal appraisal is done by a qualified appraiser.

Book a consultation (647) 778-2860

This page was made from official sources checked on Nov 2, 2026. It is not legal, tax or financial advice.

Main sources for this page

MPAC, Industrial property assessments · Nov 2, 2026
MPAC, Three Approaches to Value · Oct 30, 2026
Ontario, Property tax · Oct 30, 2026
Environmental Protection Act (Ontario) — Phase one environmental site assessment · Nov 2, 2026
Land Transfer Tax Act (Ontario) · Oct 30, 2026
Excise Tax Act, Schedule V, Part I — exempt supplies of real property · Oct 30, 2026