Riskiness of Real Estate Development: A Perspective from Urban Economics and Option Value Theory
构建了一个新的“开发资产价值指数”（DAVI），追踪土地最高最佳使用价值变化，发现该指数比传统价格指数增长更快、更平滑、周期性更弱，表明开发商利用灵活性降低了风险，而开发风险主要源于杠杆效应。
Abstract In this article, we define a new construct for urban economic and investment analysis, which revisits the conventional wisdom that investment in real estate development is riskier than investment in stabilized property assets. This new construct, referred as a “development asset value index” (DAVI), is a value index for newly developed properties (only) in a given geographical property market. It tracks longitudinal changes in the highest and best use (HBU) value of locations, and it reveals developer and landowner behavior taking advantage of the optionality inherent in land ownership. In particular, the DAVI reflects developers' use of flexibility in the exercise of the call option to (re)develop the property to any legal use and density. We empirically estimate a DAVI for commercial property ( i.e ., central locations) and compare it with a corresponding traditional transaction‐price‐based property asset price index (PAPI) corrected for depreciation. We believe that the difference primarily reflects the realized value of flexibility in land development. We find that the DAVIs display greater value growth and are smoother over time and less cyclical than their corresponding PAPIs for the same locations. This suggests that developers successfully use flexibility, and that development may be riskier than stabilized property investment due primarily only to leverage effects (construction costs). Practical implications are also discussed.