The use of judgement by commercial property developers

In the UK, as in other developed market economies, commercial property is a multimillionpound industry that makes an important contribution to GDP and employment.Commercial development is a classic example of a high risk / high return business; afact that is particularly apposite in times of economic uncertainty. Developers clearlytake significant risks at various stages of the development process; and they do this inanticipation of the considerable financial rewards on offer. Equally, when theirassessment indicates it, the decision will be taken not to proceed. On what basis do theymake these decisions? Previous research by the author found that, while formal riskassessment is undertaken by developers, the process is heavily influenced by their riskattitude and ‘judgement’. The research seeks to explore these issues by generatingempirical data on developers’ ‘judgement’ and setting them against existing theoreticalwork. The overall aim of the study is to examine the issue of ‘judgement’ in risk-relateddecisions in the property development process, and to determine whether this conceptcan be theoretically explained using existing work on risk, risk attitude and heuristics.The method of enquiry is predominantly in-depth, semi-structured, face-to-faceinterviews with experienced property developers. At this stage the data has beenanalysed by a sorting and sifting process to try and find similarities, differences andpatterns in the responses. The research has found that property developers essentiallybelieve that they adopt a fairly objective approach to risk related decision makinghowever the use of judgement, intuition and experience was frequently referred to. Apreliminary analysis of the data suggests that heuristics play a role in the decisionmaking process. In particular the availability heuristic, confirmation trap and cautiousshift heuristic are evident. The work reports on the interim findings of a continuingstudy, and conclusions are, as yet, provisional, but in terms of its aims, objectives andmethod the paper gives an insight into an important and little researched issue in theproperty development industry.