Transferring outranking models to real estate management: The assessment of potential investment markets using PROMETHEE

Abstract

Purpose

For the purpose of decision-making in real estate portfolio management, alternatives are to be collected, assessed and prioritized. Due to the complexity of real estate markets, investment products and management processes, the respective decision situations are subject to several parameters. Multi-criteria models must be used to exactly evaluate and prioritize alternatives. Such models can be found in other economic and social areas but must be transferred or re-developed for the purposes of real estate management. The paper aims to discuss these issues.

Design/methodology/approach

The paper includes the transfer of the basic outranking methodology, the PROMETHEE (Preference Ranking Organization METHod für Enrichment Evaluations) method in particular, to real estate issues. Methods used outside the real estate industry are analyzed, selected and adapted by using real estate parameters (transfer approach).

Findings

Structured multi-criteria processes such as PROMETHEE are suitable for the solution of complex real estate selection decisions. The methodology with regard to the respective issues is much more consistent and efficient. PROMETHEE avoids the restriction of criteria in mathematical calculations and the restriction of quality in simple scorings.

Research limitations/implications

The target system and decision criteria of investors were used exemplarily. The individual parameters and criteria can lead to new model solutions.

Practical implications

Multi-criteria models such as PROMETHEE stringently and transparently solve complex decision problems and alternative evaluations in real estate portfolio management. They can be developed for strategic, tactical and operative decision situations. The decision quality and verification for compliance requirements improve.

Social implications

Multi-criteria models such as PROMETHEE can also be developed for social, societal and political decision situations.

Originality/value

First adaption of the outranking procedure PROMETHEE to a real estate decision situation in market analysis and portfolio management.

Citation

Metzner, S. (2018), "Transferring outranking models to real estate management: The assessment of potential investment markets using PROMETHEE", Journal of Property Investment & Finance, Vol. 36 No. 2, pp. 135-157. https://doi.org/10.1108/JPIF-01-2017-0009