Investing in commercial real estate : An analysis of the purchasing power in Stockholm´s retail areas

Abstract: The interest in investing in commercial real estate has increased in recent years and as a result the need for making well informed investment decisions has increased as well. Investing in real estate is different from investing in other asset classes due to its longevity, spatial constraint, regulatory framework etc. and thus investing in commercial real estate requires knowledge of the specific attributes of the property itself as well as in the factors in the surrounding area that affect the property. Thus, the purpose of this thesis is to enlighten the reader of the various investment issues that arise when investing in commercial property and to give an account of how the investment decision is actually performed and what factors affect it. The research on how commercial real estate investments are made is firstly provided through a literature review that highlights several investment issues and illustrates of how investment decisions are made by conducting the market analysis. In the next section of the thesis, a practical market analysis follows conducted on the retail area of Stockholm that is based on the findings and suggested procedures in the literature review. The market analysis is designed to incorporate a qualitative research where the data is gathered and calculated and a quantitative research where the data compiled in the quantitative research is analyzed and interpreted. The analysis of the market analysis shows that there is a vast amount of data available to consider when executing the market analysis and that these data have to be carefully selected in the screening of the real estate market. It is vital to include only relevant factors that affect the demand for the specific property, and consequently the ability of the property to generate payoff, in order to for the market analysis to provide insightful and important guidance for the investment decision at hand. Even though the research  in this study provide important implications for investor on which demand factors that are important in a market analysis, the study is still limited by the inaccessibility to property specific demand factors such as rental contracts and repair and maintenance costs, which results in a suggestion of further research in this field in particular.