Conceptualising real options analysis for risk and uncertainty management in Australian property developments

Mintah, K and Baako, K 2019, 'Conceptualising real options analysis for risk and uncertainty management in Australian property developments', RELAND: International Journal of Real Estate & Land Planning, vol. 2, pp. 58-73.


Document type: Journal Article
Collection: Journal Articles

Title Conceptualising real options analysis for risk and uncertainty management in Australian property developments
Author(s) Mintah, K
Baako, K
Year 2019
Journal name RELAND: International Journal of Real Estate & Land Planning
Volume number 2
Start page 58
End page 73
Total pages 16
Publisher RELAND
Abstract Property developments are inherently uncertain and risky. As a result, several risk management techniques are adopted by property developers in the Australian property development sector to mitigate the impact of potential downside risks. However, uncertainty can create potential upside opportunities for property developers during the property development process which can be explored through flexibility/real options analysis. Several quantitative models and applications have been executed in the literature on flexibility/real options analysis, but practical adoption is still lacking because practitioners are yet to fully understand the theory and its potential benefits. In this paper, a conceptual model is developed to capture flexibilities/real options and linked to the property development process to determine the exact stages within the property development process where real options could be embedded to retain the potential for capturing future upside benefits from uncertainty. Through face to face semi-structured interviews with twelve different stakeholders in the Australian property development industry, thematic analysis and extensive literature review on real options theory, a conceptual model is developed. There are several flexibilities/real options naturally embedded at different stages of the property development process. Other flexibilities can be embedded in the development process deliberately by property developers with the intention of capitalising on upside opportunities in future. These flexibilities embedded at different stages of the development process has the potential to serve as a risk mitigation tool for property developers in Australian property development sector. The model can serve as a practical tool and a visual aid for property development practitioners and stakeholders to determine the exact stages in the property development process where real options are embedded and the specific types of options. It will also aid in deepenin
Subject Building Construction Management and Project Planning
Keyword(s) Property development
Real options analysis
Conceptual Model
Copyright notice © 2019 by Author(s). This is an open-access article distributed under the terms and conditions of the Creative Commons Attribution 4.0 International (CC BY 4.0). See https://creativecommons.org/licenses/by/4.0/
ISSN 2623-4807
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