Study On The Pricing Model For Commercial Real Estate Lease

Large scale chain retail business enjoyed rapid growth in China recently, thus increased the demand of large scale commercial real estate. The market of large scale commercial real estate follows the rule of traditional real estate market, but has its own uniqueness. Therefore, special care must be taken when pricing the rental fee for properties of large scale retail business. This article starts research focusing on the following aspects:Chapter one: Summary. This part briefly introduced the background, content, methodology, and innovative point of the study of this paper. So that readers can have an overall understanding of the framework of this paper.Chapter two: Study of commercial real estate theories both foreign and domestic. A comprehensive introduction has been given to the development of commercial real estate both foreign and domestic, and reviewed the current status of research over studies of commercial real estate. Following that, the prior research of pricing models for commercial real estate has been compared, and the theory and application of internal rate of return in evaluating commercial real estate has been introduced.Chapter three: Analysis of the influencing factors in pricing the commercial real estate. This chapter first introduced the recent situation of Shanghai commercial real estate market. Coupled with the current development status of representative cities in China, this paper analysed the various factors to be considered when pricing commercial real estate, including catchments analysis, tenant sales level and operation strength. Also, this paper analysed the content and methodology of catchments analysis.Chapter four: Research of pricing model for commercial real estate rent. This chapter compared and analysed several widely used pricing model in detail, discussed shortcomings of the traditional pricing model using Internal Rate of Return, and conducted model improvement.Chapter five: Empirical study. Using a multinational retail chain company in Shanghai as example, test the analytical power of the pricing model. The Empirical study showed that the improved IRR model can better reflect the market reality in analyzing property project, and can help better decision making. The rental fee is most expensive for Shanghai, Beijing and Guangzhou, whereas lowest in North and Northeast, middle in East and South China. The return on investment is highest in Beijing, Shanghai and Guangzhou, lowest in North and Northeast, middle in East and South China.Chapter six: Review and Looking Forward: This chapter reviewed the achievement and shortcomings of this research, and identified directions for further study.This paper using the vision from tenant of commercial real estate, using financial date and relative analytical methodology as base, researched the pricing model of the rental fee of commercial real estate. The key research outcome of this paper includes:(1) Analysed and compared relative theories and models for pricing commercial real estate in the past.(2) Based on internal and external factors analysis, this paper modified and established the pricing model for rental fee of large scale retail business real estate, i.e. using Internal Rate of Return as study objected, coupled with catchments analysis, company performance factor, location factor, analysed and evaluated the dynamic relationship between IRR and property price, concluded the result of pricing model.The Innovative points of this paper can be summarised as two parts: theoretical and empirical. Theoretical innovation is mainly expressed in Chapter two, three and four; the empirical innovation is mainly expressed in chapter five. The main innovation of this paper includes:(1) This paper studied the shortcomings of the pricing model based on traditional finance data analysis, and pointed out the root cause of pricing model errors, and improved the Internal Rate of Return model to be used to price property projects, and explained in detail the theories and methodologies of catchments analysis, and the related sales forecast methods.(2) Using one of the multi-national chain retail business in the China market, through the record, analyse, summary of big quantity of raw data of domestic large scale commercial real estate market, this paper used the pricing model established in this paper to conduct the empirical study of the relationship between International Rate of Return and rental fee level, for domestic property projects, and concluded findings. This is pioneer activities in China's large scale commercial property research area.(3) Based on the results of empirical study and according to the aspects which affects the economic development, this paper discussed the reasons why the return rate of real estate investment in different regions of China has differences, and compared and analysed the economic radiance power of different regions in domestic. This reveals the rule of location and return for large scale commercial retail company, and provides support to help large scale retail company to make decision on the strategic development.