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Flexibility decision pathways in the management of uncertainty in property development: experience from an emerging market

Timothy Oluwafemi Ayodele (Department of Estate Management, Obafemi Awolowo University, Ile-Ife, Nigeria and Department of Quantity Surveying and Construction Management, University of the Free State, Bloemfontein, South Africa)
Abel Olaleye (Department of Estate Management, Faculty of Environmental Design and Management, Obafemi Awolowo University, Ile-Ife, Nigeria)

Journal of Financial Management of Property and Construction

ISSN: 1366-4387

Article publication date: 8 February 2021

Abstract

Purpose

This paper aims to investigate the flexible decision pathways adopted by development advisors in the management of uncertainty in property development. Specifically, the study examines the quantitative techniques adopted by development advisors, the level of adoption of real options analysis (ROA) vis-à-vis the level of adoption of heuristics. Finally, the types of options exercised in property development were analysed. This was with a view to providing information that could mitigate the challenges of risk and uncertainty and increasing investment failure associated with property development in Nigeria, an emerging market.

Design/methodology/approach

The study adopted a survey method and was conducted on development advisors in property development companies/estate surveying and valuation firms in Nigeria. A total of 195 development advisors participated in the survey. The respondents were required to rate, on a five-point Likert scale, the level of adoption of the quantitative models, heuristics and the types of flexibility exercised during development. The data were analysed using mean rating, one-sample t-test and analysis of variance.

Findings

The results revealed that there was a preference for the use of traditional techniques, while probabilistic appraisal models and other contemporary methods such as ROA are seldom adopted by development advisors. While there was a significantly high level of adoption of heuristics, the stratified analysis examining the profile of the respondents and the level of adoption of ROA and heuristics suggests that years of experience influenced the level of adoption of both the ROA and heuristics by the development advisors. The analysis of the types of flexibility showed that staging/phasing and changing the initial use/design were the most prevalent flexibility pathways adopted during the development. However, the study found that there was no significant difference concerning the choice of flexibility being adopted by development advisors who used ROA and those who did not.

Practical implications

The study provides an understanding of the decision pathways adopted by development advisors in an emerging market like Nigeria.

Originality/value

The paper contributes to studies on decision-making pathways in the management of uncertainty under dynamic conditions by development advisors in emerging markets.

Keywords

Citation

Ayodele, T.O. and Olaleye, A. (2021), "Flexibility decision pathways in the management of uncertainty in property development: experience from an emerging market", Journal of Financial Management of Property and Construction, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFMPC-05-2020-0037

Publisher

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Emerald Publishing Limited

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