Exploring office investment decision‐making in different European contexts

In: Journal of Property Investment & Finance, Volume 25, Issue 3, p. 289-305

Abstract

PurposeStudies of UK and US property investment markets have historically portrayed the decision‐making process as an exercise in rational analysis. This notion is fundamentally flawed as the concept of a perfect market has limited applicability to the real world context in which property investment decisions are taken. Investment decision‐making is neither clinical nor methodical but is undertaken by imperfect players in imperfect markets using imperfect information. The purpose of this paper is to explore the decision making processes of investors.Design/methodology/approachA normative‐behavioural framework incorporating heuristics is used, a technique whose application in property research has previously been limited to valuation. The empirical vehicle for the research was an exploration of the spatial dimension of office property investment in different European contexts.FindingsThe findings of in‐depth case studies of investment decision‐making in France, Germany and the UK indicate that the decision‐making process, as perceived by institutional investors, does not deviate significantly from normative models. However, investors tend to "collapse down" the decision‐making process, taking shortcuts to achieve (in some cases, predefined) investment outcomes. These short‐cuts potentially leave the decision‐making process open to the influence of bias, judgement and sentiment.Originality/valueThis study represents the first attempt to explore, empirically and in detail, the property investment decision‐making process.