Determination of the capitalization rate based on generalization of the trading segment market information

. The commercial real estate market has been hit hard by the coronavirus. Many segments of commercial real estate in 2020 found themselves in a situation of complete cessation of activity due to the lockdown. Each segment is experiencing crises in the economy in its own way, however, it should be noted that even in the current circumstances, the commercial real estate market is mobile, supply and demand is present, real estate transactions are being made. The purpose of the study is to determine the capitalization rates for the trading segment using the direct capitalization method. Tasks: determining the state of the commercial real estate market, in particular the retail segment, determining which objects of the considered segments can be applied to the direct capitalization method, determining the calculation of the capitalization ratio, using regression analysis to refine the results of the capitalization ratios, analyzing the obtained values. The work used the method of direct capitalization, the method of direct comparison, regression analysis, data analysis. As a result of this study, capitalization rates for the trading segment were determined using the direct capitalization method. The objects of the considered segments are determined, to which it is possible to apply the direct capitalization method.


Introduction
The justification of the capitalization rate is a relevant, open question due to changes in the real estate market, incomplete information, uncertainty, in general. What rates to apply in the current economic situation is a question that many appraisers ask. The real estate market is influenced by many factors, both external and internal. External factors include: state, economic, social, and also environmental. Internal factors include: location features, characteristics of tenants and investors, income generated by real estate and others [1]. It should be noted that the real estate market is inelastic, has low liquidity, and there is also such an influence as the behavioural characteristics of market participants. Approaches, methods of appraisal activities, the accumulated knowledge base provides a breadth of opportunities for appraisal, restrictions are imposed both by the appraised objects themselves (after all, each property is individual) and because of the reasons indicated earlier. In valuation activities, the following approaches are distinguished: comparative, costly and profitable [2].
Comparative approach -an approach that consists in comparing the characteristics of the assessment object with the characteristics of an analogue object in order to determine, by means of adjustments to the specific value of the cost, the better the analogues are selected, the more accurate the result [3]. But the real estate market is not always able to provide the necessary analogues. The income approach is based on discounting the cash flows generated by the property [4]. The cost approach is used as part of the comparative and income approach, it is necessary when calculating the costs of restoring a similar object. Each of the presented approaches has its own assessment methods, which have their own characteristics and application features. In the framework of this work, the income approach is considered.
This approach includes a set of methods for assessing the value of objects, which include: the method of direct capitalization, methods of capitalization of income according to the rate of return on capital [5]. The latter, in turn, is subdivided into: the method of discounted cash flows and the method of capitalization of income by calculation models. The choice of these methods depends on the specific real estate that can generate income in the future. The direct capitalization method is mainly used for objects with a stable level of income, the capitalization method according to the rate of return on capital is applicable only to objects with an unstable level of income, the method of discounting cash approaches is generally universal. The income approach is applicable only to objects that generate income, as the name implies, that is, we will consider commercial real estate objects. There are the following segments of commercial real estate [6]: -office real estate market; -retail real estate market; -hotel real estate market; -warehouse market; -industrial real estate market. Figures 1 and 2 shows the distribution of offers for the sale and rent of commercial real estate by its segments.
Each segment is experiencing crises in the economy in its own way, so the hotel segment suffered the most due to the closure of borders, the retail segment was partially affected, in particular, large retail facilities such as shopping malls, malls, shopping malls, such facilities as supermarkets, supermarkets, food stores continued their activities. The office segment quickly adapted to the new conditions, during the lockdown, offices were closed, but activities could be freely carried out remotely, at the moment there is a trend towards co-working [7]. The warehouse segment in the period under review has become more developed, relevant, online purchases stimulate investment in this segment. The industrial segment was inactive during the lockdown period, at the moment there is also a recovery after the crisis, and new production bases and technology parks are being built.

Materials and Methods
The retail real estate market is diverse and includes both small built-in stores and large detached shopping centres and shopping complexes. Retail real estate is divided into: class A (trading centre, shopping and entertainment centre, shopping centre, mall, hyper mall, hypermarket), class B (supermarket), class C (lower floors of residential buildings), class D, class E (lower floors of buildings for free use). Retail real estate objects may differ in scale, type of building, type and method of arrangement, and product specialization. The constructive type of the object, the scale of the object and its commodity nomenclature are essential [8]. Table 1 shows the classification of retail real estate. Since the method of direct capitalization will be considered as part of the current work, it is necessary to select objects from the considered segments with a more stable income. It is assumed that, in relation to the retail segment, supermarkets, retail chain stores, standing separately, exist in a competitive environment, where prices are set by competing entities, and incomes and expenses are quite predictable, because the need for products is constant. In general, we can talk about the stability of these real estate objects. The method of direct capitalization is based on the fact that the income from the use of the property and the proceeds from its resale are capitalized into the current value, which will be the value of the property [9]. The general formula for determining the value of a property using the direct capitalization method is as follows: where NI -net income from the operation of the property; CR -capitalization ratio; Vvalue of the property.
To find the net income, it is necessary to clear the gross income from non-payments and underutilization and clean out operating costs from it. An important component of this method is the determination of the capitalization ratio, which is defined as the ratio of net profit received from the operation of the property being valued, and the reimbursement of capital spent on the acquisition of this object.
There are the following methods for determining the capitalization ratio [10]: -direct comparison method (market squeeze method); -method of cumulative construction (summation method, or cumulative method); -the method of linked investments of debt and equity capital; -a method of connected investments of land and building. As part of this work, the direct comparison method will be applied to determine the capitalization ratio, since this method perfectly shows the real situation in the real estate market under consideration, and also does not require a large number of assumptions and justifications. The difficulty lies in the selection of the analogous objects themselves, the closer the similarity of the objects, the more reliable the result. The method of direct comparison (method of market squeeze) consists in comparing the object being valued with an analogue object, it is assumed that similar objects have the same capitalization rates [11]. The main data collected for similar objects are net income and the sale price of objects. The division of the mentioned components one by one is the capitalization ratio.

Results and Discussion
For the retail segment, both stand-alone supermarket-type store buildings and built-in premises of the same purpose are considered separately [12]. Let's consider stand-alone buildings first. For stand-alone buildings, data on offers for rent and sale of similar objects of the retail segment are presented in Table 2. The annual income of similar objects was calculated at rental unit rates per 1 sq. m, the load factor for the trade segment of the considered type of objects is 100%. The calculation results are also presented in Table 3. The average value of the capitalization rate was 8.96%. The mean value was calculated without using weight values due to the similarity of the objects. The coefficient of variation was 7.80, the analogous objects are homogeneous. The results of regression analysis using the least squares method was 0.08 or 8.0%. All calculations were made using MS Excel. The initial data for building a regression model are sales and cost data based on the following function: where I -net operating income; R -capitalization rate; C -offer cost. The values of statistically important indicators testified to the high statistical significance of the results obtained. We will also start from the results of regression analysis due to the accuracy of the calculations.
Consider the built-in premises of the same purpose. For detached buildings, data on offers for rent and sale of similar objects of the retail segment are presented in Table 4. Based on rental rates and the area of analogous objects, the annual income was calculated, and a load factor for the retail segment of the considered type of objects of 100% was applied [13]. The calculation results are also presented in Table 5. The average value of the capitalization rate was 9.07%. The average value was calculated without using weight values due to the similarity of the objects. The coefficient of variation was 8.57, the analogous objects are homogeneous.
The results of regression analysis using the least squares method was 0.089 or 8.9%. All calculations were made using MS Excel. The values of statistically important indicators testified to the high statistical significance of the results obtained. We will also start from the results of regression analysis due to the accuracy of the calculations Let's analyze the obtained capitalization ratios for the retail segment. Let's compare the received data with the market analytics data, which is in the public domain. Thus, the maximum capitalization rates in the retail real estate market are 8.0%-9.5%. The capitalization rate for the retail segment for both embedded and stand-alone segments, obtained using regression analysis, was 8.9% -9.07%. In general, the discrepancies in the obtained values and the values presented by the analytics of other verified Internet sources can be explained by the following points [14]: -date of assessment; -information gathering technique; -information characteristics. The date of assessment plays an important role; this is the principle of assessment activities [15]. Given the dynamism of the market and its constant updating, setting a specific date makes it possible to analyze the situation only in one or another period, that is, to cut data at a certain moment, and then comes expert forecasting, an analysis of possible market development scenarios. It should be noted that the direct capitalization method is specific and good with a sufficient amount of information that can be collected extractively from open sources. The collection technique involves how to obtain information, through what sources. Reliability, provability of information also reflect the principles of appraisal activities. If information comes from unverified sources, errors in the results may occur.

Conclusion
Characteristics of information includes an understanding of the object of evaluation under study. In this paper, specific objects that bring a stable income were considered. It should be noted that few objects can bring a stable income, so the inclusion of other objects in the calculation entails incorrect results.
In general, considering that the maximum capitalization ratios from open sources were taken, it can be said that the retail sector with class B objects is developing steadily and shows high values, based on the direct capitalization method based on the obtained capitalization ratios.
The direct capitalization method shows the real situation in the market, as it was revealed for the retail segment. The disadvantage of this method is that it is applicable only to objects with a stable income, that is, it is not universal, and the lack of sufficient market data limits the use of this method.
In general, the obtained capitalization ratios for the considered segments and objects had their own characteristics, which are not always similar to the general market analytics, since the date of collection, the unique characteristics of the objects of assessment, the methods of collecting information affect the overall result and a general understanding of the situation regarding specific real estate objects.