Guides/Commercial property yield explained
Commercial property yield explained
Learn how commercial property yield is calculated and why it should be considered alongside rent, costs, the lease and the asset.
Yield compares a property’s income with its capital value. It is often shown as a percentage and can help investors assess an opportunity alongside other information about the asset.
A simple yield calculation
A basic gross yield calculation is:
Annual rent ÷ purchase price × 100
For example, if a property produces £50,000 a year in rent and costs £1 million, the gross yield is 5%.
This is a simple comparison, not a forecast of the investor’s return. It does not account for purchase costs, repairs, insurance, management, rent-free periods or time without an occupier.
Gross yield and net yield
Gross yield uses the rent and purchase price without deducting property costs.

Net yield attempts to account for costs, but it's not useful for comparison unless you know what's included. Check whether the calculation allows for acquisition fees, repairs, service charges, insurance, management costs and periods when rent may not be received.
For a more detailed appraisal, the investor may also need to consider lease events, rent reviews, future capital work and the likely value of the property when sold. RICS identifies income and market-based yield as key inputs in the investment method of valuation.
Yield is one part of the assessment
A higher yield does not automatically make a property a better investment. It may reflect a shorter lease, a property needing work, uncertainty about future rent or a location with fewer potential occupiers.

Review the tenant, lease, property condition, local demand, costs and the evidence used to estimate rent and value. Consider how the property might perform if the current occupier leaves or the market changes.
North360 can discuss the property, its income and the factors to investigate. This guide is for general information and is not a formal valuation or investment recommendation.