Rapid assessment of the investment attractiveness of retail real estate by a private investor: approaches, algorithm, and verification of results

the relevance of this study is driven by sustained interest from private investors in retail real estate amid rising prices, declining vacancy, and spatial differentiation of the market, which heightens the need for rapid decision-making tools without access to proprietary analytics and complex models. The aim of the research is to develop an applied rapid-assessment methodology based on public sources and basic return metrics, enabling comparisons of alternative assets and scenarios at the early screening stage. The initial context is illustrated with data on the Moscow market in 2024, which recorded price growth, lower vacancy, and pronounced differences across districts and formats. A stepwise procedure is proposed that includes calculating gross potential income and effective gross income with vacancy and collection loss, deriving NOI, selecting a market capitalization rate and obtaining value via direct capitalization, as well as checking the payback period and a simplified DCF with terminal capitalization. For verification, cross-checks are introduced using the sales comparison approach based on public listings and the cost approach as a lower bound of reproduction cost accounting for depreciation. The methodological framework relies on standardized terminology (NOI, CAPEX, Cap Rate, Discount Rate, DCF, NPV, IRR, Payback, Terminal Value), ensuring comparability of calculations and reproducibility of results. Validation on market cases showed that simplified income-approach valuations are consistent with benchmarks set by listings and analytical reviews, while heightened sensitivity was found to vacancy parameters, rent indexation, and the choice of Cap Rate. For assets with pre-signed lease agreements, payback periods are closer to the lower bound of the range, whereas for secondary stock without anchor tenants the timelines lengthen due to a discount reflecting lower demand quality and CAPEX requirements. Including terminal capitalization makes it possible to account for residual value and reveal the investment’s margin of safety under variations in key assumptions.

retail real estate, income approach, capitalization rate, discounted cash flows, rapid assessment