Among the three uses in the scenario, which yields the lowest value?

• A. Residential
• B. Commercial
• C. Industrial
• D. All are equal

Answer: (A)

Value in the Sales Comparison Approach comes from the expected income a property can generate and how the market prices that income. When you compare different uses on the same site, the one that can’t capture as much income or long‑term cash flow tends to have the lowest value.

Residential use typically yields lower rents per unit and can be more sensitive to economic swings, meaning the investment cash flow is smaller or more uncertain than for commercial or industrial uses. Commercial and industrial uses usually attract higher rents and longer-term leases, giving investors a stronger, more stable income stream. Because value reflects that income potential, the residential use ends up with the smallest value among the three. The other uses would generally command higher values due to greater income potential, and saying all are equal ignores these differences.