JB PARCELPad Site Value Calculator
A pad site is worth whatever ground rent it can command, capitalized, or whatever comparable dirt sells for. This runs both and shows you the gap between them.
How this calculator works
There are two ways to value a pad site and you should always run both. The income approach capitalizes the ground rent: if a quick service restaurant will pay $92,000 a year and ground leases in your market trade at a 5.5 percent cap, the site supports $1,672,727. The sales comparison approach multiplies the site by what comparable commercial dirt sells for per square foot or per acre.
When the two answers disagree by more than about fifteen percent, something is off. Either the ground rent you assumed is above or below what the market will actually pay, or your land comps are not really comparable. Sites a quarter mile apart on the same road can differ by half in value based on which side of the signal they sit on.
Ground lease cap rates run tighter than improved property because the landlord owns dirt, takes no construction risk, has no maintenance obligation, and sits in first position ahead of the tenant's building. When the improvements revert at expiration, the owner ends up with a building they did not pay for, which is real value the cap rate does not show.
The usable share field matters more on pad sites than almost anywhere else. Setbacks, detention, cross-access easements, and slope can take twenty percent of a site out of play. Comparable prices are typically quoted on gross acreage while value follows buildable area, so a site with poor usable percentage should trade below the comps.
Worked example: an outparcel on a Tennessee arterial
A 1.15 acre corner outparcel at a signalized intersection. A national quick service tenant will ground lease it at $92,000 a year.
| Site square feet | 50,094 |
|---|---|
| Value at a 5.5% ground lease cap | $1,672,727 |
| Value at $32 per square foot | $1,603,008 |
| Gap | $69,719 |
| Implied price per square foot | $33.39 |
| Ground rent per square foot | $1.84 |
Four percent apart, which is close enough to call the pricing supported. The $1.84 per square foot of ground rent against $32 per square foot of land value is a 5.75 percent yield on dirt, which is roughly where these trade. If the tenant only offered $70,000, the income approach would drop to $1.27 million and you would know the site is worth more sold than leased at that rent.
Questions investors ask
What drives pad site value?
Traffic count, visibility, access, and signalization, roughly in that order. Size matters far less than people expect. A 0.9 acre pad with a dedicated left-turn lane at a signal is worth more than a 1.4 acre pad two hundred yards down with right-in right-out only. Pull traffic counts and the surrounding parcel pattern on the JB PARCEL map before you price anything.
Why do ground leases trade at lower cap rates?
Less risk. The landlord owns the land, has no building to maintain, no roof to replace, and no capital expenditure exposure. The tenant builds at their own cost and typically takes on taxes, insurance, and all maintenance. And at the end of the term, the improvements usually revert to the landowner. That combination of low risk and a free building at the end is what compresses the cap rate.
Should I ground lease or sell the pad?
Compare the capitalized ground rent against the sale price, then decide based on your tax position and your time horizon. Selling produces cash now and a taxable gain. Ground leasing produces income, keeps the reversion, and preserves control over what gets built next to your center. If the income approach and the comps are close, this is a tax and strategy decision more than a valuation one. Talk to your CPA about the sale and about a 1031 exchange if you sell.
What should I check before pricing a pad site?
Zoning and permitted uses, whether a curb cut has been approved by the state or city, utility capacity at the site, detention and stormwater requirements, cross-access and parking easements with the adjacent center, and any restrictive covenants from a previous anchor tenant. Any one of them can make a site that looks buildable undevelopable, and none of them show up in a per-acre comp.
How do I find comparable land sales?
Pull recent sales of nearby commercial parcels on the parcel map, filter for vacant land use, and divide sale price by acreage. Screen out anything that is not truly comparable in traffic, access, and zoning. Then have a commercial broker who works that corridor check your numbers, because the assemblage and hold-out sales that show up in public records can badly distort an average.
Related calculators
Screening a real property? Pull its appraised value, assessed value, acreage, land use, and last recorded sale off the JB PARCEL parcel map and drop the real numbers into this calculator instead of guessing. Coverage runs across every county we carry.