Commercial real estate trends : An office market comparison between Stockholm and Boston

Abstract: Over the past few years there has been a clear trend regarding demand for office space in the central business district, CDB. The rent level is far greater there than in any other area, and vacancy is very low compared to other submarkets. People tend to prefer greater office location over salary and the office location works as a status symbol. Over the past few years companies have started to rearrange their offices, both interior wise and location wise. Some larger firms have moved their headquarters and offices from the central to prime suburbs, and many more are following this strategy. This study examines, by comparing different sub markets in Stockholm with similar submarkets in Boston, how the commercial real estate market in Stockholm will develop and what movements to expect in the office market. Are Stockholm’s sub markets following the Boston sub markets footsteps? Stockholm is growing rapidly both economically and population wise. Access to land in the city is limited and the boundaries of the inner city are pushed outwards. To the meet the demand in the inner city a common trend the past few years has been to reconstruct and convert office space to housing. Former industrial premises that earlier where converted to offices are now reconstructed as housing. Another trend has been to exploit and develop new areas outside the city to meet today’s demand. Problems occur when the majority of offices operate within the city, pushing the demand for transportation and increasing the density of 2 commuting. Since the commuting hours are becoming greater the demand for adjacent work places and offices may increase. The purpose of this master thesis is to investigate how the trends for office locations in Stockholm may change. In addition to that a comparison to the office market in Boston will be made. The areas that are defined in the study are Solna, Sundbyberg and Stockholm City in Sweden and Cambridge, Seaport and Downtown in Boston, USA. Every office market and sub market is unique in many ways which always needs to be in the back of the head of the reader when looking at this report. Boston and Stockholm are both premier cities when it comes to center of education and being a hub for tech start-ups and financial giants and are both following the general ups and downs of the economy. The conclusion drawn from this study is that each market are following the same trend but varies in initial levels and relative to each other. Regarding the rent level, Solna and Sundbyberg will, unlike Cambridge and Seaport, most likely not exceed the rent level in CBD and also not fall below in vacancy rate. The sub markets in each country differs a lot but Solna and Sundbyberg will most likely follow Cambridge and Seaport in both increasing rent levels and decreasing vacancy rates thanks to continuous increase in popularity - A big partition factor between the two Cities.