Determining Risk Management Dynamics: An Analysis of Risk Perceptions of Real Estate Development Firms in Turkey

Although it is well known that there are many sources of risks in real estate investments, particularly in commercial real estate investments, the works are frequently commenced without consideration of risk resources and uncertainties in the project evaluation and investment decision making processes. The nature and impact on investment value of environmental, economic, real estate sector, and project risks are observed to vary from the beginning of the project development process until the end of it. Dynamic methods are often used in commonplace feasibility studies and integration of risks to calculations and periodically updating feasibility analyses are found to be usually neglected. However, project-specific risks such as the ownership of land, land development rights, and demands of the owners of neighboring parcels and economic risks directly affect the feasibility of the investment and can be major sources of failure.In this study, risk perceptions of upper middle managers of large-scale real estate development companies were evaluated and risk management approaches implemented within the companies were discussed. The scope of the study was limited to companies that are members of the Turkish Contractors Association (TCA), to which only the biggest real estate firms of Turkey can be members, and members of other important associations. In the construction and real estate market, two of the most important sectors in the Turkish economy, members of the TCA realize 70%of construction works within the country and 90%of the works undertaken by Turkish contractors abroad and have the ability to represent the industry. In this study, the impact of risk according to its resources on the preparation and implementation of real estate projects and risk perceptions of managers were examined based on the responses received to the questions electronically sent to the members of the TCA and other important associations. The study results revealed that that developers carry out risk management and decision support system activities, use intuitive risk analysis methods, utilize risks in integrated decision-making processes and the risk items that the developers consider are identified. According to the study results, sales forecasts, and the changes in foreign exchange and interest rates are significant in risk management in line with academic studies.