A practical Malaysia-focused guide to value industrial land using comparable sales, yield-back (income) and residual methods—with simple formulas and worked examples.
Industrial Land Valuation 101: Comparable Sales, Yield-Back & Residual Method
Three practical ways to estimate value for industrial parcels in Malaysia—when to use each method, how to adjust, and what numbers to sanity-check.
When to Use Which Method
- Comparable Sales — Best when you have recent, nearby transactions for similar sites.
- Yield-Back (Income) — Useful when there’s an income-producing improvement on site; derive total property value from NOI, then back out the depreciated cost of improvements.
- Residual — For development land: value the project (GDV), deduct all costs & profit, the remainder is the land value.
1) Comparable Sales Method
Start with recent sales and adjust to the subject property. Typical adjustments: time (market trend), size/shape, tenure, zoning, access & highway reach, utilities readiness, site formation (platform level, piling), buffers (river/HT lines).
| Comparable | Raw detail | Key adjustments | Adjusted RM/psf |
|---|---|---|---|
| Sale A | 5.0 acres @ RM75 psf (10 months ago), infra-ready | +5% time; +7% size (subject smaller); -RM6 psf infra difference | ˜ RM78.00 |
| Sale B | 1.5 acres @ RM92 psf (4 months ago), LH60 vs subject FH | -10% tenure; +2% time; -RM3 psf readiness | ˜ RM81.50 |
| Sale C | 3.0 acres @ RM80 psf (1 month ago), near HT corridor | +RM2 psf (subject has no HT constraint) | ˜ RM82.00 |
Weighted indication: 40% A, 35% B, 25% C ? ~RM80.23 psf.
Subject (example): 2.00 acres = 87,120 sq ft ? Value ˜ RM 6,989,202 (round: ~RM6.99m).
2) Yield-Back (Income) Method
Apply when the land carries rentable improvements (e.g., a factory). First value the whole property via capitalization, then deduct depreciated cost of improvements to isolate land support value.
NOI = (Market Rent × NLA × Occupancy × 12) - Operating Expenses
Property Value = NOI ÷ Cap Rate
Land Value = Property Value - Depreciated Replacement Cost (DRC) of Improvements
Worked example (illustrative)
- Built-up: 60,000 sq ft; Market rent: RM1.80 psf/month; Occupancy 95%; Opex 15% of EGI.
- Cap rate: 6.5% (stabilised, market-based).
- DRC (building + external works): RM9.50m.
NOI ˜ RM1,046,520/yr ? Property Value ˜ RM16.10m ? Land Value ˜ RM6.60m ? ˜ RM75.76 psf on 2.00 acres (87,120 sq ft).
Reality check: ensure rent, vacancy, opex and cap rate are market supported. Confirm DRC with current build costs and depreciation.
3) Residual Method (Developer’s Approach)
For sites intended for development/sale. Estimate GDV, deduct all costs (hard + infra + soft + finance) and a market developer’s profit. The remainder is land value.
Worked example (illustrative)
| GDV | RM60.00m |
|---|---|
| Construction (buildings) | RM27.00m |
| Infrastructure/Utilities | RM5.00m |
| Professional/Approvals | RM2.70m |
| Marketing & Sales | RM1.20m (˜2% of GDV) |
| Contingency | RM2.24m (˜7% of hard+infra) |
| Finance/Interest | RM3.40m |
| Developer’s Profit | RM10.80m (18% of GDV) |
| Residual Land Value | RM7.66m ? ˜ RM87.93 psf on 2.00 acres |
Reconciling the Three Indications
| Method | Indication |
|---|---|
| Comparable Sales | ~RM80.23 psf (˜ RM6.99m) |
| Yield-Back | ~RM75.76 psf (˜ RM6.60m) |
| Residual | ~RM87.93 psf (˜ RM7.66m) |
Valuer’s judgement: weigh data quality, market momentum, and site specifics. For our example, a reconciled midpoint around RM80–85 psf may be reasonable, subject to due diligence.
Data & Documents to Assemble
- Recent comparable sales (SPA dates, net areas, conditions of sale).
- Title & zoning (express/implied conditions; road/drain/river/HT reserves).
- Utilities readiness (TNB capacity, water pressure, gas availability, fiber providers).
- Market rents & cap rates for comparable factories/warehouses.
- Current build costs (C&S, M&E, external works) for DRC/residual cross-checks.
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Published by Terra Group • Industrial, Land & Commercial
