REAL OPTIONS PLANNING IN REAL ESTATE DEVELOPMENT

2010 ◽  
Keyword(s):  
Real Estate ◽  
Real Options ◽  
Real Estate Development

scholarly journals International Real Estate Review

2021 ◽  
Vol 24 (1) ◽  
pp. 1-17
Author(s):  
Yongqiang Chu ◽  
◽  
Tien Sing ◽  
Keyword(s):  
Real Estate ◽  
Real Options ◽  
Demand Uncertainty ◽  
Market Volatility ◽  
Real Estate Development ◽  
Demand Shock ◽  
Inverse Effect ◽  
Option Values ◽  
Empirical Tests ◽  
The Cost

Developers make decisions around timing and intensity simultaneously when exercising a development option. Built on the early real options models, we allow the demand shock and the cost functions to be dependent on the intensity of real estate development. Based on a set of input parameters, the numerical results show that demand uncertainty delays development activities, and the rental elasticity to density change has an inverse effect on the deferment option values. In a market where the intensity impact on rental income is small, development activities are likely to be curtailed when market volatility increases. More empirical tests could be conducted on whether more smaller-scale projects are triggered in down markets relative to up markets.

Real estate development as real options

2009 ◽  
Vol 27 (3) ◽  
pp. 221-227 ◽  
Author(s):  
Eddie Chi‐Man Hui ◽  
Hankel Hon‐Kwok Fung
Keyword(s):  
Real Estate ◽  
Real Options ◽  
Real Estate Development

scholarly journals Irreversible investment, real options, and competition: Evidence from real estate development

2009 ◽  
Vol 65 (3) ◽  
pp. 237-251 ◽  
Author(s):  
Laarni Bulan ◽  
Christopher Mayer ◽  
C. Tsuriel Somerville
Keyword(s):  
Real Estate ◽  
Real Options ◽  
Real Estate Development ◽  
Irreversible Investment
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