The human factor: the “unknown unknowns” in the real estate development process
| DOI | https://doi.org/10.1108/JPIF-11-2021-0099 |
| Published date | 20 December 2021 |
| Date | 20 December 2021 |
| Pages | 300-305 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Elaine Worzala,David Wyman |
The human factor: the “unknown
unknowns”in the real estate
development process
Elaine Worzala
The George Washington University, Washington, District of Columbia, USA, and
David Wyman
Department of Management and Marketing, College of Charleston,
Charleston, South Carolina, USA
Abstract
Purpose –Volatility, Uncertainty, Complexity and Ambiguity (VUCA) are terms the military have coined to
describe the environment they often operate in. This paper examines how this decision-making framework can
be used to better inform real estate investment and development. In celebration of this journal’s 40th
anniversary, we also explore how VUCA can be related to and expand on the teachings of Dr. James A.
Graaskamp who published his seminal piece on the Fundamentals of Real Estate Development (1981) the same
year. In that piece, he highlights the importance of paying attention to the human factor, the consumers of real
estate.
Design/methodology/approach–This is a thought piece on an alternative decision-making framework that
can help capture the dynamic environment that commercial real estate investors and developers are currently
working in. VUCA captures the difficulty of predicting the future in a world of accelerating, unpredictable
change. This is particularly important in today’s rapidly changing world caused not only by the current
COVID-19 pandemic but also the exponential growth of the proptech industry as well as the increasing risks
and opportunities associated with climate change that continues to impact the built environment.
Findings –This is not a traditional research project with empirical findings. We are presenting an alternative
framework for thinking about making investment decisions in these current volatile, uncertain, complex and
ambiguous times today and in the future. In addition, the importance of multidisciplinary training and the
human factor are stressed.
Research limitations/implications –There are no limitations to this research as it is the ideas of the
authors. Implications are to help real estate investors, developers and educators better understand the
environment that they are working in.
Practical implications –VUCA captures better the dynamic nature of real estate investments compared to
traditional analysis. It helps one better analyze the risks and returns butalso to acknowledge that there is a lot
you cannot predict and there are many exogenous variables that can, at times, completely change the rules of
the game. Flexibility and adaptability are essential tools for working in a VUCA environment. In addition, the
human factor plays an increasingly important role and real estate investors and developers that clearly
understand this and focus on the consumer will likely be more successful.
Originality/value –We believe that this is the first time that VUCA has been used in the real estate academic
literature.
Keywords VUCA, COVID-19 pandemic, Proptech, James Graaskamp, Real estate investments, Uncertainty
Paper type Viewpoint
A real estate development project is an exercise in project management that makes
assumptions about the future. This future is composed of “known unknowns,”uncertainties
that can be reasonably foreseen or predicted, and “unknown unknowns,”unexpected
experiences that cannot be reasonably foreseen or predicted. A problem for real estate
developers is predicting such unknowns given the duration of their projects. Whereas a
clothing business may change inventory every quarter, “the real estate developer is locked
into a specific location with an immovable inventory of room nights, apartment months, or
square feet of leasable area that must be priced and sold many times, for as long as 25 years,
before the total capital investment is recovered”(Graaskamp, 1981, p. 239). Given the
JPIF
40,3
300
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 30 November 2021
Revised 5 December 2021
Accepted 5 December 2021
Journal of Property Investment &
Finance
Vol. 40 No. 3, 2022
pp. 300-305
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-11-2021-0099
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