Your account

Commercial yield calculator

What a commercial building yields once the void, the rates and the dilapidations are in

Commercial property is priced off the yield and bought on the lease. A ten year term with no break to a strong covenant and a twelve month void at the end of it are two completely different assets at the same headline yield. This prices the income, the empty rates that land on you the day the tenant leaves, the dilapidations you may or may not recover, and what the building is worth if the yield moves half a point.

For: Commercial premises let to somebody who trades from them

Tell us what you are looking forAll calculators
The building
What is it?
The strongest sector for a decade. Short supply, and tenants tend to stay because moving a fit-out is expensive.
£
£
What the tenant actually pays today, not the estimated rental value. If they are over-rented, the rent falls at the next review and the yield you bought disappears with it.
ft²
Commercial is measured and priced in square feet in the UK, whatever the rest of the world does.
£
On the Valuation Office list. It is the tenant's bill while they are there and yours the moment they leave. At this rateable value the small business multiplier of 43.2p gives £16,416 a year.
The lease
The lease is the asset. The building is where it happens.
yr
yr
The term to the break is the term that matters for valuation, because that is the point at which the tenant can leave. A ten year lease with a break at five is a five year lease with an option.
Covenant strength
An established trading company with filed accounts and a track record.
Full repairing and insuring?
The tenant carries the repairs, the insurance and the rates. This is the standard UK commercial lease and it is why commercial yields look so much better than residential ones until the building empties.
What happens when they leave
This is the part that is missing from every yield in a brochure, and it is the part that decides the return.
mo
Six months on industrial, nine to twelve on secondary retail and offices. The unit still has to be marketed, fitted and let.
mo
Standard on any commercial letting: three months on a short term, six to twelve on a longer one. It is a real cost and it never appears in the headline rent.
%
Agent at 10% to 15% of the first year's rent, plus the legals on the new lease.
£
The UK average across sectors is about £7.27 a square foot. London offices run £15 to £35. It is the cost of putting the building back to the state the lease requires.
%
A dilapidations claim is capped by the diminution in the building's value, so a full schedule rarely recovers in full. Sixty per cent of the claim is a realistic settlement, and nothing at all if the tenant has gone into administration.
%
Three to five per cent on a single let building, more on a multi-let where somebody has to run a service charge.
%
Even on an FRI lease something lands on the landlord: the parts of a service charge that cannot be recovered, professional fees, and the structural items outside the tenant's covenant.
Value and finance
%
Prime City offices are at 5.50% and the West End at 3.75%. Secondary offices transact at 6% to 9%. Industrial has been the strongest sector for a decade.
%
Sixty to sixty five per cent is normal on commercial investment, well below residential buy to let.
%
×
Commercial lenders size on the whole payment, capital included, rather than on interest alone. 1.3 to 1.5 times is the usual requirement.
Yield across a full cycle, not just while it is let3.8%The headline gross yield is 6.9% and the net initial yield 6.1%. Averaged across 5.5 years including a 6 month void, the empty rates, 6 months rent free for the next tenant and the dilapidations you do not recover, it is 3.8%. That gap is the entire difference between a commercial investment appraisal and a yield quoted in a brochure.
6.9%Gross yield
6.1%Net initial yield
£56,940Cost of one void
£0Empty rates exposure
£10.00Rent per sq ft
Net income kept66%Void and rent free22%Dilapidations not recovered7%Management5%
While it is let
Passing rent£52,000
£10.00 a square foot.
Management£2,080
Non-recoverable costs£1,560
On an FRI lease the tenant carries repairs, insurance and rates. This is what still reaches you.
Net income while let£48,360
A 6.1% net initial yield on £790,500 all in, including £27,000 of stamp duty at non-residential rates.
When they leave
Empty business rates£0
£16,416 a year, and industrial gets six months' relief before it starts. After that it lands on you in full for every month the unit is empty.
Rent you do not receive£24,180
6 months of void.
Rent free for the next tenant£26,000
6 months. Standard on any commercial letting and never in the headline rent.
Letting costs£6,240
Dilapidations, net of recovery£18,720
A £46,800 claim at £9.00 a square foot, of which you realistically recover 60%. Capped by the diminution in value, and worth nothing at all against a tenant in administration.
Total cost of one void£75,660
1.6 years of net income. That is what the lease is protecting you from, and it is why the unexpired term matters more than the rent.
Capital value
At 6.00%£866,667
6.00% adjusted by +0.00 points for a medium covenant. Against £750,000 paid, that is £116,667 of value.
A quarter point yield shift, either way+£37,681 / −£34,667
More capital value than a year of rent, in both directions. Commercial is a bond with a building attached, and the yield is the discount rate.
Value with two years left on the lease£717,241
A short unexpired term prices about a point and a quarter wider, because the buyer is underwriting the void you would otherwise have carried. Selling with five years to run is worth far more than selling with two.
Finance
Loan the income supports£378,578
Capped by debt service cover at 1.40 times rather than by the 60% ceiling. That is 50.5% of value.
Monthly payment£2,879
Amortising over 20 years, which is standard on commercial. This is why debt service cover is a much harder test than a buy to let interest cover ratio at the same number.
Cash on cash return3.4%
On £411,922 of your own money, while it is let. Across a full cycle it is materially lower, because the void still has to be paid for while the debt keeps being serviced.
Where these figures come from

Yields. Prime City office yields are 5.50% and West End 3.75%. Secondary offices transact at 6% to 9% or more depending on covenant and location. Industrial has been the strongest sector, with prime headline rents reaching about £15.55 a square foot by mid-2025. Prime City office rents hit a record £130.80 a square foot in Q1 2026.

Business rates 2026/27. Small business multiplier 43.2p below a £51,000 rateable value, standard 48.0p at or above it, and a new permanently lower retail, hospitality and leisure multiplier of 38.2p. Small business relief gives 100% relief to £12,000 and tapers to £15,000, on a single property. Empty property relief is three months, or six on industrial, after which the full charge falls on the owner.

Dilapidations. The UK average across sectors is about £7.27 a square foot. London offices run £15 to £35, and modern office reinstatement and redecoration £15 to £25.

Stamp duty at non-residential rates, which carry no additional property surcharge however many properties you own.

Before tax. Commercial property is priced off the lease rather than off the building: the unexpired term to the first break, the covenant and the rent review basis do more to the value than the condition does. A dilapidations claim is capped by the diminution in the building's value under section 18 of the Landlord and Tenant Act 1927, which is why a full schedule rarely settles in full. Where a lease is protected by the Landlord and Tenant Act 1954 the tenant has a right to renew, which cuts both ways: it reduces the void risk and it limits your ability to get the building back. VAT may have been opted onto the building, which changes the stamp duty and the buyer pool. An estimate, not advice and not a valuation.

Next

The calculators that go with this one.

Each answers a single question, on its own page, with every figure in it yours to change.

All 30 calculators →

Commercial mortgage

What will a commercial lender advance against this?

Open →

Letting commercially

What does letting this commercially actually return?

Open →

Stamp duty

What is the purchase tax on this, wherever in the UK it is?

Open →