in this area, and the highly affected risk factors and the least affected risk factors in the
commercial real estate development process.
Risk and uncertainty arecommon to all real estate development and, therefore, the actual
return of the investments will differ from what is expected. In certain cases, it includes the
prospect of losing the original investment. However, Pidgeon as cited in Khumpaisal et al.
(2010) classifies risk into “objective”or statistical risk and “subjective”or perceived risk. In
this classiﬁcation, Pidgeon et al. pointout that the objective risk, which is unique, substantive
and physically measurable, can be determined by quantitative risk assessment methods.
Furthermore, Hargitay and Yu have classiﬁed risk into systematic risk s and
unsystematic risks, which is a different reading compared to the previous one. Moreover
Hargitay, Yu, Brown, Matysiak, Baum and Crosby as cited in Khumpaisal et al. (2010) had
observed systematic risk (uncontrollable risk) caused by external factors that affect all
investments; examples include market risk, inﬂation or purchasing power risk, and interest
rate risk. Unsystematic or speciﬁc risk refers to risk over which the investor has limited
control and is speciﬁc to a particular company or investment decision-making process.
In those circumstances, where risk and uncertainty are reported according to the RICS
Appraisal and Valuation Manual RICS (1996) as cited in Adair and Hutchison (2005)
prescribed standards the profession has been condemned for irregularities and letdowns. To
reﬂect risk and uncertainty in certain valuation assignments such as the pricing of urban
regeneration land (Syms, 1996). However, Hutchison and Nanthakumaran as cited in Adair
and Hutchison (2005) examine issues relating to market efﬁciency, individual and market
worth, and risk analysis. Indeed, the Investment Property Forum and Investment Property
Databank (IPD) 2000 as cited in Razali and Adnan (2015) highlighted the need for more
rigorous risk assessment measures within the broad property investment industry,
comprising asset and fund managers and advisors.
Furthermore, Huffman (2002) put major risks associated with commercial real estate
development intothree categories such as ﬁnancial risks, physical risksand regulatory risks.
But Booth as cited in Khumpaisal and Chen (2009) shows that the STEEP factors, namely
Social, Technological, Economic, Environmental and Political factors, have been widelyused
in the business context, but with different names, such as PEST, TESP and STEP. In this
regard, PEST is an abbreviation of political, economic, social and technological factors; these
factors shall be concerned while the decisionmaking. The real estate developers haveto take
into account the assessment method; the current practice established is the risk matrix
ioMosaic; Kindinger and Rafele as cited in Adairand Hutchison (2005) describe the likelihood
and consequencesof each risk in a tabular format.It states that the risk can stronglyinfluence
each project stage: the project conceptual, project feasibility analysis, design and planning,
bidding and tendering construction and execution and handover stage.
Risks are associated with every investment; real estate development, as an investment, is
not an exception. Real estate development has its own risks, particularly in relation to the
decision-making process of a new development project. Hence, risks affect the entire project
management process in terms of schedule delay, cost overrun and quality of products,
according to Khallafalah, Flyvbjerg and Gehner as cited in Adair and Hutchison (2005).
According to Khumpaisal and Chen (2009), risks in each commercial real estate development
can be identiﬁed at the project management level, using brainstorming techniques. Risks are
generally deﬁned as events that could arise and affect the critical factors of one project
(Khumpaisal and Chen, 2009). Khumpaisal and Chen (2009) had identified many direct or
indirect reasons why risks may occur in commercial real estate development, and several
normal reasons relevant to the fragment existed throughout a project lifecycle covered by
design, construction and facilities management, which are consequences of lack of integration
of building elements, communication among project partners, and even misapplication of the
building structure and its services systems. With regard to competitive enterprise growth and