System Dynamics in Real Estate: Bridging Sustainable Development and Investment Strategies

Martin Schnauss and Patrick Spieler

ERES from European Real Estate Society (ERES)

Abstract: Real estate valuation involves a variety of methodologies, but the recursive dynamics inherent in real estate development are often overlooked. These dynamics involve feedback effects that significantly affect the life cycle of a property. This paper presents the application of system dynamics methodology to real estate valuation, highlighting its utility in setting priorities for sustainable real estate development. Moreover, this approach facilitates the projection of a property’s evolution in terms of its environmental, social and governance (ESG) compliance, taking into account the evolving nature of a property’s rating. Such ratings are critical to investors, including funds, who need to make informed decisions about the long-term development of properties and their fit within investment portfolios. Therefore, the methodology discussed here goes beyond traditional Discounted Cash Flow (DCF) methods by providing a more holistic and dynamic framework for understanding and predicting the multiple impacts on real estate valuations.

Keywords: Rating; Simulation; sustainability; System Dynamics (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-env and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2024-200

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