How much is a warehouse property actually worth? The uncomfortable answer is that it depends on who has to sell, who has to buy, what kind of capital the buyer brings to the table, and how much it would cost to replace the same functional value.

The Misconception: A Valuation Is Not the Transaction Price

In industrial real estate, one fundamental mistake is made again and again. It is assumed that if a property has a valuation, that figure should also reflect the price at which the transaction will ultimately take place. In reality, these are different things. The same warehouse can have one value on paper, another value in negotiations, and a third value in an actual transaction. This is not an anomaly. This is how the market normally works.

In Tallinn, a 1000-square-metre warehouse may receive an estimated value of 500 000 €. On paper, the logic is understandable: the building is 15–20 years old, in average condition, with an expected net operating income of approximately 45 000 € per year and a required yield of 9%. The result is a value in the range of 400–500 € per square metre. The owner’s price expectation for the same asset, however, may be 800 000 €. In another case, the transaction may take place at a lower level. The question is not which number is morally more correct. The question is which of them is achievable in that specific situation.

Different Parties, Different Calculations

This is exactly where the different logics of the market collide. A valuation is a methodological opinion of value at a specific point in time. The seller’s asking price is a reservation price — the level below which it no longer makes sense for them to give up the asset. For the buyer, what matters is utility value, yield, opportunity cost and financing capacity. For the bank, the central question is collateral risk, not the fairness of the seller’s expectation.

The final transaction price only emerges when these logics overlap sufficiently.

For that reason, a valuation report is neither a mistake nor an obstacle. It simply fulfils a different role than is often expected of it. The purpose of a valuation report is to provide an independent and justifiable assessment based on market data, yield logic, condition, location and risk. It is a necessary tool for banks, investors and owners, but it is not a promise that the asset can be bought or sold in the market at that same price. A valuation report does not measure the seller’s motivation, the buyer’s pressure, or the price at which a space with the same function can actually be replaced.

In older industrial and warehouse real estate, this distinction becomes especially clear.

The value of such an asset is not determined solely by age, gross area or general technical condition. In practice, far more is determined by the yard area, electrical capacity, access, loading logic, detailed planning, visibility, position within the supply chain, and how well the property supports the user’s daily operations. A warehouse may be technically tired but commercially very strong. In industrial real estate, function often matters more than appearance. This brings us to the question that the owner sees differently from the buyer. If the owner sells a functioning 1000-square-metre warehouse today, what will they replace it with?

When land, design, permits, utilities, construction cost, financing cost, time and infrastructure development are all taken into account, replacing a space with comparable utility value may cost significantly more than the initial number visible on paper would suggest. In many cases, the total cost of acquiring an asset with similar functional value already moves into a range that is materially higher. And even then, the new asset may not have the same location or be ready for use within the same timeframe.

Where Theory Breaks Down in Practice

This is the point where many theoretically logical price disputes break down in practice. The buyer looks at the report and asks why they should pay more. The owner looks at the alternatives and asks why they should sell for less. Both may be completely rational within their own logic. They are simply not solving the same problem. This is also where the difference between a forced sale and a voluntary sale becomes important.

If the seller is under refinancing pressure, facing liquidity issues, working against a deadline or dealing with another unavoidable need to release capital, the price logic changes. In such cases, a transaction may take place at levels that a voluntary seller would otherwise never accept. This is why the same asset can trade below its valuation at one moment and significantly above it at another. The question is not only about the property itself, but also about the seller’s situation, the buyer’s need, the cost of capital and time pressure. However, the real obstacle to transactions is usually not a debate over whose worldview is more correct. More often, the obstacle is the capital structure.

Assume that a risk-based valuation has placed the asset at 500 000 €, while the seller is asking 800 000 €. If the bank finances 65% of the risk-based value, the loan amount is 325 000 €. The buyer does not receive 65% financing based on the purchase price, but 65% financing based on the bank’s collateral logic.

The difference must be covered with equity.

This immediately changes the entire composition of the buyer pool. A typical investor may lose interest because the yield no longer supports the required equity contribution. A user may remain interested because the location or function is strategically important, but may not have sufficient capital. For a neighbouring company, the same property may be a logical acquisition because it reduces operating costs, avoids the need to relocate, or enables expansion within the same operational node. Therefore, the price gap does not arise only between the seller’s expectation and the buyer’s wish. It also arises between different buyer profiles.

This is precisely where the broker’s role becomes important.

In this type of market, the broker is not merely an intermediary who places the property on the open market. Their real task is to understand for whom the asset is simply expensive — and for whom it is strategic. They must identify the buyer who has both the capital and the reason to complete the transaction. A warehouse that appears overpriced to the general market may be a fully rational purchase for a specific user if the alternative is slower, more expensive or operationally weaker. In this kind of market, transactions often happen not because the price becomes attractive to everyone, but because the right counterparty is found.

This brings us to the broader market logic.

Industrial real estate is not traded in a perfectly liquid market where hundreds of comparable assets change hands every month. It is a thin market, where prices are not discovered continuously, but episodically. There is a limited number of comparable transactions, the use logic of each asset is partly unique, and transactions often occur when a specific buyer meets a specific need. In such an environment, it cannot be assumed that appraised value, the seller’s reservation price and the market-clearing price will always move at the same pace.

Which Price Is Actually Achievable?

That is why the question of how much a property is actually worth often has more than one answer.

For the bank, value is collateral.
For the user, value is operational capability.
For the investor, value is yield and exit logic.
For the owner, value is connected to replacement, scarcity and the decision not to sell.

A transaction only happens when these views overlap at least partially.

In this light, it is misleading to ask whether the valuation or the asking price is correct. The better question is: which price is realistically achievable in this specific market situation, with this specific buyer pool and this specific capital structure? That is the difference between paper value and a completed transaction.

So, how much is your property actually worth?

The honest answer is not found in a single report alone. The value on paper is a necessary reference point. It gives the discussion a framework, helps banks assess risk and keeps the market away from pure speculation.

But in industrial real estate – especially in a market with limited supply, rising construction costs and long implementation timelines – the actual transaction price is always shaped by the situation.

It depends on whether the asset can be replaced within a reasonable time and at a reasonable cost.
It depends on whether the owner has a real reason to sell.
It depends on whether the buyer has a need, not just interest.
And it depends on whether the buyer has the financial capacity to complete the transaction.

In the warehouse market, value is not just a number. Value is position, opportunity cost, time pressure and negotiating power. A valuation report may show where the conversation begins. The market decides where it ends. Perhaps the next time someone wants to sell a warehouse, the first question should not be: how much is it worth? A better question is: who might actually need it?