Risk assessment in commercial real estate development: An application of analytic network process
Journal of Property Investment & Finance
ISSN: 1463-578X
Article publication date: 29 May 2019
Issue publication date: 9 July 2019
Abstract
Purpose
The purpose of this paper is to analyze the commercial property development risk factors from the entrepreneur’s point of view against social, economic, environmental, technological and political risk assessment criteria. After that, this study aims to assess the risk factors based on the analytical network process (ANP) model and to prioritize the key risk factors to identify which risk factor is highly affected to the commercial development process.
Design/methodology/approach
The data were collected through face-to-face interviews using a structured questionnaire. The analysis of the risk factors involved the ANP model using super decision software.
Findings
The results revealed that there are five major risk factors such as environmental, social, economic, technological and political risk, and 32 sub-risk factors. According to the super matrix calculation, the synthesized values for three projects were 0.0704, 0.0532 and 0.0431, respectively. It was identified that Ward City was 0.0704, indicating that it is comparatively less risky and, hence, can be categorized as the best development and considering the sub-risk factors; the results show that the highly affected risk factors for the development are: the council approval process, climate changes and natural disaster, and the least affected risk factors are confidence to the market, lifecycle value, investment return and currency conversion factor.
Practical implications
The paper includes implications for the development of commercial properties, risk and risk assessment criteria to make risk management strategies and policy implementation.
Originality/value
The research findings are helpful in improving risk management strategies in the country, and policy formulation should focus on the above identified three risk factors in order to mitigate the risk in every stage and to achieve sustainable project development while increasing the satisfaction of long-term investment goals.
Keywords
Acknowledgements
This research was supported by a grant from the RPDC, DEMV, University of Sri Jayewardenepura.
Citation
Thilini, M. and Wickramaarachchi, N.C. (2019), "Risk assessment in commercial real estate development: An application of analytic network process", Journal of Property Investment & Finance, Vol. 37 No. 5, pp. 427-444. https://doi.org/10.1108/JPIF-01-2019-0002
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited