Equivalent Yield
Solve the single yield that equates term and reversion income to capital value.
Introduction
Who this is for: Valuers and analysts appraising reversionary commercial investments.
Why it matters: Initial and reversionary yields each tell half the story. Equivalent yield blends them into the one figure the investment market actually quotes for a reversionary asset — the weighted return across the whole income profile.
Typical scenario: An office bought for £1.4m, passing £78,000, ERV £110,000, reversion in 3 years.
- Quoting initial yield on a heavily reversionary asset, which understates the return.
- Confusing equivalent yield with equated yield, which also allows for rental growth.
- Using the wrong reversion date — it is the review or expiry, not lease end where a break exists.
Inputs
Investment
years
Analysis
The equivalent yield is 7.42%, sitting between the initial yield of 5.57% and the reversionary yield of 7.86%. Of the £1,400,000 value, £1,196,848 (85.5%) sits in the reversion — that is the portion dependent on achieving ERV.
This analysis provides context, not financial advice. Consult a qualified adviser before making investment decisions.
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Live Results
Equivalent Yield
7.42%
Initial Yield
5.57%
Reversionary Yield
7.86%
Initial to Reversionary Spread
2.29%