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Article
Publication date: 19 March 2024

Nikodem Szumilo and Thomas Wiegelmann

This paper aims to provide a comprehensive analysis of the transformative impact of Artificial Intelligence (AI) and Large Language Models (LLMs), such as GPT-4, on the real…

Abstract

Purpose

This paper aims to provide a comprehensive analysis of the transformative impact of Artificial Intelligence (AI) and Large Language Models (LLMs), such as GPT-4, on the real estate industry. It explores how these technologies are reshaping various aspects of the sector, from market analysis and valuation to customer interactions and evaluates the balance between technological efficiency and the preservation of human elements in business.

Design/methodology/approach

The study is based on an analysis of the strengths and weaknesses of AI as a technology in applications for real estate. It uses this framework to assess the potential of this technology in different use cases. This is supplemented by an emerging literature on the topic, practical insights and industry expert opinions to provide a balanced perspective on the subject.

Findings

The paper reveals that AI and LLMs offer significant benefits in real estate, including enhanced data-driven decision-making, predictive analytics and operational efficiency. However, it also uncovers critical challenges, such as potential biases in AI algorithms and the risk of depersonalising customer interactions.

Practical implications

The paper advocates for a balanced approach to adopting AI, emphasising the importance of understanding its strengths and limitations while ensuring ethical usage in the diverse and complex landscape of real estate.

Originality/value

This work stands out for its balanced examination of both the advantages and limitations of AI in real estate. It introduces the novel concept of the “jagged technological frontier” in real estate, providing a unique framework for understanding the interplay between AI and human expertise in the industry.

Details

Journal of Property Investment & Finance, vol. 42 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 30 April 2024

Thomas Wiegelmann and Horacio Falcão

The purpose of this briefing is to highlight the critical importance of negotiation skills in the everyday lives of real estate professionals. It delves into how negotiators must…

Abstract

Purpose

The purpose of this briefing is to highlight the critical importance of negotiation skills in the everyday lives of real estate professionals. It delves into how negotiators must improve their negotiations skills given the negotiation-intensive nature of real estate. It also helps to handle common pitfalls and challenges in negotiations, particularly in the increasingly volatile, uncertain, complex and ambiguous (VUCA) reality of the real estate industry. The briefing offers strategic insights for preparation and negotiation aimed at improving any real estate negotiator’s average performance.

Design/methodology/approach

The expert opinion piece combines a literature review on negotiation strategies with practical insights. It addresses the observed under appreciation of negotiation theory and skill, reflecting on real-world real estate negotiations. The goal is to enhance the use and recognition of negotiation theory in the real estate industry. The approach merges theoretical analysis with practical application, offering actionable recommendations to improve negotiation outcomes.

Findings

The negotiation-intensive real estate industry and the transformative impact of VUCA challenges on real estate professionals’ ability to adapt and continuously negotiate successful deals clashes with many real estate’s professional or fixed mind-set over negotiation historically being an art or a talent and mostly being stuck with win-lose strategies. Instead, negotiation is a science that can be learned and deliberately improved to counter stress-induced or fear-based responses that lead negotiators toward suboptimal negotiation strategies, such as win-lose or naive win-win. However, these dynamics are preventable. Well-equipped and well-prepared value win-win negotiators can adopt a growth mind-set, study modern negotiation advice and frameworks to thrive in the negotiation-rich real estate industry and convert even VUCA challenges into an amazing source of value.

Practical implications

Real estate professionals can become more aware of which and how current obstacles and poor choices negatively contribute to their negotiation performance. It contrasts win-lose and win-win strategic frameworks to enable real estate professionals to become more sophisticated when choosing their negotiation strategies. The briefing also helps real estate professionals expand their negotiation repertoire towards improved strategic flexibility when managing the evolving real estate profession reality and challenges.

Originality/value

The originality and value of the briefing lie in its comprehensive approach to addressing the negotiation challenges faced by real estate professionals. It offers a holistic view of real estate negotiation, advocating for a paradigm shift from traditional win-lose tactics to a collaborative, value win-win approach. The briefing integrates modern negotiation theory and emphasises ethical practices, providing practical strategies and best practices for professionals to improve their skills and adapt to industry changes. By empowering real estate professionals with knowledge and tools to navigate negotiations effectively, the briefing contributes to the overall success and professionalism of the industry.

Details

Journal of Property Investment & Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 28 July 2023

Thomas Wiegelmann and Horacio Falcão

The practice briefing aims to provide real estate professionals and negotiators with a superior understanding of negotiation process design to maximise real estate disposition…

Abstract

Purpose

The practice briefing aims to provide real estate professionals and negotiators with a superior understanding of negotiation process design to maximise real estate disposition outcomes. The purpose of this paper is to discuss the aforementioned objective.

Design/methodology/approach

This is an expert opinion piece that merges the practical anecdotal knowledge from a real estate expert and a professional negotiator. This opinion piece results from the identification of an underappreciated pattern that the two experts uncovered while discussing several real estate disposition cases, namely the importance of designing a negotiation process to maximize the positive impact of real estate disposition strategies.

Findings

Proactively crafting a negotiation process and matching the same to leverage the chosen real estate disposition strategy, instead of relying on a standard negotiation approach across the board, enhances the odds of negotiating superior outcomes.

Practical implications

In this practice briefing, real estate professionals and even negotiators of other assets can become more aware of the plurality of value drivers, consider the most attractive potential buyers, then use these two variables to craft the optimum disposition strategy for their asset, as well as match a negotiation process out of four main possibilities: 1-to-1, 1-to-few, closed-to-many and open-to-many.

Originality/value

The originality comes from demonstrating based on the authors' expert opinion how negotiation process is an important variable in real estate transactions, and how the parties can shape the negotiation process to their conditions, variables and preferences.

Details

Journal of Property Investment & Finance, vol. 41 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 5 February 2018

Nikodem Szumilo, Thomas Wiegelmann, Edyta Łaszkiewicz, Michal Bernard Pietrzak and Adam P. Balcerzak

The purpose of this paper is to evaluate how real estate returns behaved over the last two decades in relation to the other two asset types. This allows a direct evaluation of how…

Abstract

Purpose

The purpose of this paper is to evaluate how real estate returns behaved over the last two decades in relation to the other two asset types. This allows a direct evaluation of how investors make allocation choices and perceive risks and rewards offered by properties in the context of changing market conditions.

Design/methodology/approach

A de-smoothed MSCI index is used to reflect direct property returns and control for both income and capital returns within it. Indirect property returns are approximated by the RX Real Estate index. By supplementing this data with an analysis of trends in both space and capital markets it is possible to relate investor behavior to events affecting other assets.

Findings

It is possible to identify three distinctive periods characterized by different correlation of returns and behavior of investors: before the crisis of 2008, the crisis period between 2008 and 2012 and recovery afterwards. These appear to have corresponded to different stages of the economic cycle. Interestingly, performance of asset classes has also differed over that period suggesting that at different points in the cycle asset allocation decisions may have been made differently.

Practical implications

It appears that as investments over the last 15 years real assets in Germany behaved similarly to bonds. It is possible that this phenomenon was driven by an aversion to the stock market and its associated risk which became a concern after the financial crisis of 2008. Over the downturn that followed the market shock investors appear to have turned to assets with simpler risk profiles like direct real estate and government debt. On the other hand, the correlation between direct property investment index and stock returns has been found to be small but negative. This shows not only that the two asset classes were often driven by different factors but also suggests that diversification was, at least theoretically, possible.

Originality/value

Direct real estate investment returns have repeatedly been found to exhibit characteristics similar to those found in bond as well as equity markets (Eichholtz and Hartzell, 1996; Clayton and MacKinnon, 2003) but little research examines the correlation between returns offered by those asset classes in a mature financial and property market. In addition, the recent financial crisis provided a dynamically changing investment which is ideal for investigating structural relationships between assets.

Details

Journal of Property Investment & Finance, vol. 36 no. 1
Type: Research Article
ISSN: 1463-578X

Keywords

Content available
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Abstract

Details

Journal of Property Investment & Finance, vol. 30 no. 6
Type: Research Article
ISSN: 1463-578X

Article
Publication date: 1 August 2016

Jonas Hahn, Verena Keil, Thomas Wiegelmann and Sven Bienert

The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting…

Abstract

Purpose

The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting and investment markets.

Design/methodology/approach

For this analysis, the authors constructed two vector-autoregressive models, measuring the response of office rents and capital values in Germany to economic impulses. The authors isolated effects of unique exogenous positive shocks (such as economic growth or interest leaps) on the basis of impulse-response functions in order to understand the complex dynamic interdependence between several economic factors and office performance changes.

Findings

The authors initially find a moderately positive development of both office performance components even although supposing an increase in interest level. In terms of capital values, the authors find that they do not drop before 1.5 years after the interest impulse and the negative effect peaks after approximately nine quarters. Furthermore, the reaction to a change in GDP is significantly lower than a reaction to the interest rate, but impulses in other macro-economic factors provoke stronger reactions. Finally, the authors find that a positive interest shock leads to a comparably robust development and economic sustainability in office rents throughout a consideration horizon of 24 quarters.

Research limitations/implications

Estimations are based on observations from a time period containing two rather extraordinary market phases. As they included bubble growth and the low-interest environment, the authors find that certain patterns in both phases neutralize each other when looking at the total time frame. The authors constructed sub-samples to compensate for this. However, the research does not provide to what extent the measured impulse-responses stay forecast-proof, if the market moves into a phase of short-term normalization.

Practical implications

This paper provides insights into estimated impulse-response patterns on a hypothetical sudden increase of several macro-economic determinants. On this basis, the probable reaction to an increase in, for example, the interest rate level can be approximated. Also, the paper provides a fundamental understanding of the economic sustainability of German office properties in terms of their value and rent performance in the case of exogenous shocks.

Originality/value

This paper contains the first vector-autoregressive, impulse-response analysis of office markets in Germany in the context of several macro-economic drivers, including the interest level. It delivers insights into market reaction patterns on the basis of simulated one standard deviation shocks in all included variables.

Details

Journal of Property Investment & Finance, vol. 34 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 August 2016

Sergey Trofimov, Nikodem Szumilo and Thomas Wiegelmann

– The purpose of this paper is to examine state of the art data storage methods of real estate investment data.

Abstract

Purpose

The purpose of this paper is to examine state of the art data storage methods of real estate investment data.

Design/methodology/approach

It analyses the process of real estate investment in order to classify and characterize the data it generates. Appropriate literature review is provided.

Findings

The results show that a relational database is the most appropriate database management system type for real estate related data.

Practical implications

Appropriately structured and modelled data flow can improve the design of the real estate investment process. It is also concluded that adopting an optimal design of IT-solutions could improve informational and operational efficiency of the industry.

Originality/value

The subject of this paper lacks sufficient coverage. Popular database management systems are presented and analysed in the context of their suitability for the real estate industry.

Details

Journal of Property Investment & Finance, vol. 34 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 10 January 2022

Adedayo Ayodeji Odebode, Timothy Tunde Oladokun, Oyeronke Toyin Ogunbayo and Joseph Bamidele Oyedele

The upward rise of the prolonged payback period and the inability of the project to generate estimated income that has been linked with the irregular rent payments has been a…

Abstract

Purpose

The upward rise of the prolonged payback period and the inability of the project to generate estimated income that has been linked with the irregular rent payments has been a major problem confronting real estate investment. Given the fact that real estate investment is a risky investment venture with a highly uncertain future stream of income, this paper examines the effectiveness of rent recovery strategies in the emerging Nigeria residential real estate practice.

Design/methodology/approach

The study employed an exploratory research design. The study identified the five recovery strategies adopted by the estate surveying and valuation firms in Ibadan Metropolis, Nigeria. The study adopts a purposive sampling method to select 52 registered estate firms in the study area and a questionnaire using a five-point Likert scale was used to elicit information. The data obtained were analyzed using descriptive and inferential statistics.

Findings

The result showed that the rent recovery strategies adopted by the respondents include email approach, rent reminder notice, adequate maintenance, eviction notice and dialogue approach. The perceived top-rated strategies that could influence estimated income were dialogue and rent reminder notice. Also, the findings showed the factors that influence the choice of strategy are property type, company policy and the proportion of rent to the tenant's income.

Practical implications

The study has an implication for real estate investors and property practitioners regarding the willingness of the investors to invest in real estate investment.

Originality/value

This paper is relevant given the fact that the rental property market is prone to risk that could impede the regular streamflow of income. This serves as a need for examination of the effectiveness of adopted rent recovery strategies as it relates to real estate property management practice and investment viability.

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