Add Thesis

Leasing risks and commercial real estate

A study on the relationship between risk premium and leasing risks

Written by Peter Bohman, Erik Karlsson

Paper category

Master Thesis

Subject

Architecture & Real Estate

Year

2019

Abstract

Master Thesis: 2.1 Data collection For this master's thesis, a method was used to answer research questions. The selected method has been applied to deliver high-quality results that reflect current market practices in the selected business area. The selected qualitative method (interview section) is considered the most accessible alternative method. It provides both a historical overview of the subject and a snapshot of current market practices in the Swedish real estate business (as of 2019), which should clarify the implementation Any differences between individuals, companies, or market segments in the real estate of valuation practices. 2.2 Literature review This section analyzes the scientific articles, academic papers and reports of market professional companies to provide background information in the research field. Previous studies on lease risk, valuation methods and credit ratings have also been analyzed to identify any research gaps on this issue. 2.3 Method selection For this study, the preferred interview method is semi-structured interviews, which contain a set of so-called “non-standardized” questions (Saunders et al., 2016). Features of semi-structured interviews include a list of topics and some key questions that the interviewer may use to cover the topics, but this depends on the specific interview. Due to the organizational structure and background encountered during the discussion, this layout often leads to ignoring questions in the interview. Of course, new questions can be asked during the meeting to explore specific organizations related to the research questions and goals (Saunders et al., 2016). Data (respondents' responses) will be obtained through recordings of discussions and additional notes. The interview schedule should include the topic of the subject and a list of questions to be answered. The timetable should also include comments on public discussions, prompts to facilitate further discussion, and comments to close the discussion. Sandset. al(2016) mentioned that the minimum sample should include 5-25 interviews. As many respondents as possible will participate until the purpose of the method has been achieved and the research question is answered. Semi-structured interviews are a good use when you want to find out "why" instead of "how much" or "how much" (Fylan 2005). Fylan (2005) also mentioned in the master thesis the flexibility of semi-structured interviews because it can answer the "why" question well. It is possible to understand the aspects of each participant in the interview by changing the question and the field of discussion, which will help to better understand the research question. The main difference between interview and conversation is the interviewer's control (Fylan 2005). Even if the discussion is interesting, the interviewer needs to remember the purpose of the interview, what you want to discover, and steer the conversation in that direction. 2.4 The reliability of the method Although a lot of useful knowledge has been collected from the previous literature, the knowledge in this field mainly comes from foreign research based on foreign markets. The basic principles of the valuation method are considered to have nothing to do with the main country, but the actual valuation practice has yet to be determined. The number of related studies devoted to key tenant data and its relationship with risk premiums is limited, and the main principles of this issue are still considered to be included in the literature review. For the literature review part, the review report was chosen to meet academic requirements and to maintain independence in terms of potential conflicts of interest. However, there is no guarantee that all cited reports are completely free of prejudice and academic standards, so the reliability of any cited source should always be considered and cannot be used as a method alone. The lack of market literature in Sweden may be explained by the exploratory research (interview section) focused on current valuation practices. Regarding master theses and qualitative methods (interviews and questionnaires), there are some limitations in data collection and analysis. The empirical research is conducted through a semi-structured interview section, which contains open-ended questions that allow the interviewee to further elaborate on open-ended questions, as well as shorter and rigorous questionnaires. The results will only collect the opinions and experience of a relatively small number of selected experts, and may not represent the entire market or market segments. As a result, there may be a lack of information to answer the broader situation of the question completely. However, the choices of the participating respondents were carefully selected to achieve the best possible diversification, taking into account the different roles in the real estate business and the different market segments. In summary, the interviewee’s selection strategy is at least considered to represent the market and their respective market expertise as comprehensively as possible. Respondents are selected based on the basic resources of this article, and more extensive surveys or interviews may be conducted in the future. 3.1 Historical use of valuation methods Early economists, such as Adam Smith, established a theoretical basis for understanding how economic forces cooperate to achieve commodity pricing (Vandell 2007). Smith believes that value is the power to order other goods or services in exchange. He also mentioned in the master thesis two interesting concepts of "use value" and "exchange value", which have become an important reflection of the real estate market. Read Less