How to Sell a Commercial Property: Simple Steps | Hilton Smythe

How to Sell a Commercial Property

We can help leaseholders and freeholders maximise the value of their asset and manage the transaction as smoothly as possible.

We can help leaseholders and freeholders maximise the value of their asset and manage the transaction as smoothly as possible.

selling commercial property

Selling commercial property allows businesses to release funds or remove unproductive assets from their books. In 2024, 13% of the value of the buildings in the UK was commercial property, indicating a solid property market.

Unlike selling a residential property, commercial buildings have their quirks. Maximising the value of the sale means accounting for these facets before and during the sale. However, it is essential to mention the challenges of commercial real estate in the UK. According to industry experts, they expect the next five years to see an annual market contraction of 3.4%.Even so, profitable deals remain available. This guide discusses everything you must know about selling commercial property.

How is a commercial property valued?

Valuing commercial property is more complex than residential property. In most cases, comparing size, condition and nearby properties is sufficient when buying a home, but the value of a commercial property is found elsewhere.

Commercial appraisal methods depend on a business’s needs and long-term goals. Typically, commercial buyers are concerned about current and future income-generating potential. With that in mind, here are several commercial appraisal methods:

Cost Approach – Cost of land plus how much it initially costs to construct the building.

Income Approach – Potential income and cap rate (net annual rental income divided by the current property value). Pricing of similar local properties can assist with this approach.

Gross Rent Multiplier Approach – This method is similar to the above, but it depends on annual gross rents instead.

Sales Comparison Approach – Compare to what is currently in the market with a structure similar to your building.

Value Per Door – If you are trying to determine the value of individual apartments or lots within a property, take the price of the whole building and divide it by the number of apartments or lots.

No default appraisal method exists for the £1.3 trillion UK commercial property market, which is one reason why enlisting a third-party valuation agent is crucial.

For example, there is no point in using the sales comparison approach for a commercial building in a rural area when there are few to no comparable properties. In this case, a valuation agent may use the cost approach instead.

When should you sell a commercial property?

Valuing commercial property is more complex than residential property. In most cases, comparing size, condition and nearby properties is sufficient when buying a home, but the value of a commercial property is found elsewhere.

Commercial appraisal methods depend on a business’s needs and long-term goals. Typically, commercial buyers are concerned about current and future income-generating potential. With that in mind, here are several commercial appraisal methods:

Cost Approach – Cost of land plus how much it initially costs to construct the building.

Income Approach – Potential income and cap rate (net annual rental income divided by the current property value). Pricing of similar local properties can assist with this approach.

Gross Rent Multiplier Approach – This method is similar to the above, but it depends on annual gross rents instead.

Sales Comparison Approach – Compare to what is currently in the market with a structure similar to your building.

Value Per Door – If you are trying to determine the value of individual apartments or lots within a property, take the price of the whole building and divide it by the number of apartments or lots.

No default appraisal method exists for the £1.3 trillion UK commercial property market, which is one reason why enlisting a third-party valuation agent is crucial.

For example, there is no point in using the sales comparison approach for a commercial building in a rural area when there are few to no comparable properties. In this case, a valuation agent may use the cost approach instead.

When should you sell a commercial property?

There are various situations in which it would be wise to sell your commercial property, the first being when you have reached the earning potential. When your property reaches a high value, it is wise to reap the benefits of increased prices. This would be a good opportunity for anyone who is looking to gain maximum profit from their property compared to those who play it safe by having a lower, more stable monthly income.

Another situation in which selling would be beneficial is when earning potential has dropped. This could be for several reasons, such as a suffering economy, changes to the area, building damages, etc. If you are no longer making as much as you planned, it could be wise to sell.

Unfortunately, if a supplier has folded, you may have run into mortgage issues, leaving you in a tricky situation. In this case, the lenders may strongly recommend that selling the property is your best option.

You could also find that you have negative equity, which is when the market value of the property goes down, and therefore, the amount you owe on the mortgage balance becomes higher than the value of the property itself. There are ways to avoid this, such as speaking to your lender, simply waiting for the property value to return, or increasing the property value by adding extensions. However, if none of these work, it is best to sell the property.

One point worth mentioning is the downturn in the commercial property market. Should you sell your property if the market is falling? Unfortunately, this is something only you can answer. Some businesses may postpone their sales plans so that they can obtain a better price. Others may want to cut their losses.

If you are unsure, it’s worth speaking to an independent advisor to get some objective advice on what’s best for your business.

Do you need a business broker to sell a commercial property?

Enlisting a business broker to sell a commercial property in the UK is not a legal requirement. According to the iTABB trade body, no government licensing or overseeing body exists for either business brokers or commercial real estate agents. This underlines the importance of working with a reputable brand.

Despite not being mandatory, several strong arguments exist for working with a broker, including:

Niche Knowledge—Business brokers specialise in selling these types of properties, meaning they understand the intricacies and legal requirements of these transactions.

Broader Network – Brokers also provide access to a vast professional network of sellers, which could also include pre-qualified buyers.

Pricing Strategy – These experts can employ different valuation techniques and industry insights to create a pricing strategy that aligns with your goals.

TimeSaving—Attempting to manage the process alone is a recipe for disaster. Brokers use tried-and-tested processes to sell your commercial property as soon as possible.

Negotiation – Brokers can act as intermediaries between buyers and sellers. This can prevent disputes while increasing the odds of reaching a mutually agreeable price.

Business brokers aren’t mandatory, but they bring a wealth of expertise to the table while protecting your interests.

The cost of selling a commercial property

Actual costs of selling commercial property vary based on every sale. However, here’s a rundown of the primary costs you can expect to pay:

  • Commercial agent fees
  • Legal fees
  • Broker fees
  • Land Registry fees
  • Identity checks
  • Cost of EPC (if necessary)
  • Capital Gains Tax (CGT)
  • Value Added Tax (VAT)

How much tax do you pay when selling a commercial property?

How much tax you pay depends on your circumstances, including your overall income and gains from the year the sale was completed. This is why some business owners sell before or after April (the start/end of the financial year) to reduce their tax liabilities.


CGT is the main tax you can expect to pay. According to the latest rates, CGT is charged on profits at 10% or 20%, depending on whether you qualify for short or long-term CGT. High-income taxpayers should be aware that they may be forced to pay the higher CGT rate by default.Regarding VAT, Price Bailey reveals that sales and leases on commercial property are generally exempt from this tax. However, there are some exceptions. For example, commercial properties that opted out of the VAT regime would still incur a VAT charge.

Legal considerations when selling commercial property

As with any property transaction, sellers must consider the legal side. Thankfully, most issues can be averted by working with the right commercial property solicitor. Factoring in reputation, experience, and specialisation should all be critical priorities before proceeding with any sale.

Beyond hiring an experienced solicitor, other legal considerations include:

Title Deeds – You must demonstrate that you have a clean title. In most cases, proof can be obtained electronically via the Land Registry. If not, you must provide the physical deeds.

Heads of Terms – These are created during the negotiation stage, and the key terms regarding the sale, as well as details on both parties, are discussed. Note this document will also include an estimated timeline.

Due Diligence Due diligence in commercial property transactions remains as crucial as buying or selling a business. As a seller, you must disclose all relevant information about the property.  Typically, this will involve a Commercial Property Standard Enquiries (CPSE) request. CPSE details various matters, including planning compliance, environmental issues, service charges and boundaries.

Beyond these checks conducted by the buyer, both parties must define the terms and conditions of the sale, including any specific contingencies, within the sales agreement. This may include deposits and payment schedules.

Note that additional considerations come into play if selling a tenanted property, such as renewing existing leases.

If you fail to disclose relevant details or meet your legal obligations, the consequences extend beyond the sale collapsing. If you’ve breached your obligations, the buyer is within their rights to take legal action against you.

How to sell a commercial property

What does selling a commercial property look like in the UK? It’s an in-depth process, but here’s a short guide detailing the usual steps:

1. Prepare

Acquire basic details about your property that the buyer will want to know, including planning permission, use classes, lawful use certificates, business rates, Stamp Duty Land Tax, Energy Performance Certificate (EPC) and an asbestos survey. You can learn more about preparing to sell your business in our separate guide too.

2. Enlist

Assemble your team, including your commercial property solicitor and business broker.

3. Advertise

Put your property on the market. Channels include online listings, exterior signage, trade magazines and newsletter listings.

4. Negotiate

Once a buyer has been found, begin negotiations. Work with your business broker to find common ground. Be prepared to justify your business valuation.

5. Legal

Wait for all legal obligations to be conducted, including due diligence and drafting the sales agreement.


6. Sign

Once confirmed, the buyer will pay the entire sum detailed in the contract. This ends the sales process, and the buyer is free to move in.

What paperwork do you need to sell a commercial property?

Gathering the relevant paperwork before listing your property prevents delays later. Ensuring you have the correct paperwork shows you’re organised and provides buyers with everything they need to decide on the sale.

Some of the paperwork you should source includes:

Title Deed—Consult the Land Registry for your electronic deeds. If they are unavailable, you’ll need the physical deeds.

Energy Performance Certificate (EPC) – This must be provided to all buyers by law.

Lease Agreements – If the property is leased, provide a copy of the lease.

Property Information—A property information pack includes everything a prospective owner needs to know, including ground rent, service charges and any maintenance requirements.

VAT Documentation – Your VAT certificate or evidence of an opt-out or exemption.

Insurance – Provide copies of your insurance policies and any related documentation.

Compliance – Compliance documents relate to gas, electric, fire, and asbestos risks.

How to negotiate with buyers for commercial properties

Expect your potential buyer to return with a counteroffer. Rarely will you receive the original listing price, so be prepared to make compromises. Outline where you can be flexible and where your red lines are.

You should also have a strict timeline matching your commercial operations. Don’t be afraid to set limits or walk away if things aren’t going as planned. Your business broker can provide support and mediation throughout this process.

How long does it take to sell a commercial property?

In short, it depends. This may not be the answer you want to hear, but every transaction is unique. Quick sales can occur within a few weeks, whereas others can take a few months. Preparation will be key if you’re determined to make a quick sale.

Working with an experienced solicitor and a business broker can streamline the process by advising you on what you must do at every stage. At Hilton Smythe, our business brokers possess years of experience handling all types of commercial properties. If you’re ready to sell, contact us today.

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