Real estate value: creation and destruction

Abstract

Purpose -A central consideration in real estate is the analysis of those factors that impact upon value, in particular how value is created in real estate development and investment deals. The converse of understanding how real estate value may be destroyed is equally important. The paper seeks to argue that a better understanding of these processes would allow more informed and successful decisions to be made in structuring investments and evaluating performance. Design/methodology/approach -An innovative web-based survey tool was employed. The paper analyses expert opinion based on a sample of 97 real estate professionals from North America and Europe. Those issues that can impact on the creation and destruction of value in real estate development and investment projects and their relative magnitude of impact are assessed. Findings -There is no apparent distinction between those factors that create value and those that destroy value, though there are variations in the magnitude of impact. Idea/concept is the major influence for development projects and is even more pronounced for real estate investment. Perception/recognition of the opportunity is a key driver of value. Research limitations/implications -Limitations arise from the response rate which allows an upper tier of analysis across the entire data set but is not of sufficient size to disaggregate either by respondent professional group or by geographical region. Originality/value -Although the objective of real estate development, investment and deal making is value creation, there is, paradoxically, little literature about creating value. This paper is the first study to elicit opinion internationally on the subject and to quantify the relative contribution of a range of factors concerning value creation and destruction in a real estate project.

The Role of Pre-letting in Office Property Development in the UK

“…The development process is often represented as a sequence of events (Miles et al, 2000, pp. 5-7;Roulac et al, 2006). However, most authors acknowledge that events are interlinked in practice due to circumstances, timing and tactics (Gore & Nicholson, 1991;Birrell & Bin, 1997).…”

Towards Sustainability of Real Estate Development: An Integrative Review of Smart City Planning Considerations

“…The current study broadly identifies factors that affect real estate investments and therefore development patterns, and which should be considered at the planning stage in order to achieve sustainable smart cities. Projects have a greater chance to succeed if appropriate and adequate time and effort are committed to the planning stage to understand challenges/risks and opportunities that might be present throughout the project [16]. The current study reviews extant evidence to identify contemporary ways of helping Africa to deal with its housing infrastructure backlog and sustain real estate investments.…”

Illustration of value creation in real estate business

“…In general, the theories show the input and the output but do not explain what happens between them. Roulac et al (2006) have gone a bit further and identified the value creators and value destroyers in real estate development projects. However, the understanding of value creation should be more deeply in order to reach effective management of value.…”

“…The focus is no longer just on cost minimisation and real estate operations but on supporting end-customer functions and users. However, it is still relatively unknown how the value is actually created for the end-customer in real estate business (Roulac et al 2006). On one part, the added value theories in corporate real estate management and in facilities management have successfully pinpointed the added value of real estate for organisations core business (e.g.…”