SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE Daniela Busse & Thomas Lützkendorf Germany UNIVERSITY OF KARLSRUHE DEPARTMENT OF ECONOMICS & BUSINESS ENGINEERING KARLSRUHE UNIVERSITY ERES_CONFERENCE_STOCKHOLM_SWEDEN 24TH-27TH JUNE 09 Decision Making and Sustainability – Does it matter?

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 2 Decision Making and Sustainability – Does it Matter? Vicious Circle of Blame Owners/End-Users We‘d like to own sustainable houses but there are very few available. Designer/Constructor We can built or retrofit buildings in a sustainable way but developers don't ask for it. Developer We’d ask for sustainable buildings but the investors don't ask for them. Investor We would invest in sustainable buildings but there's no demand for them. source: * Cadman, D und Lorenz, D.

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 3 Decision Making and Sustainability – Does it Matter? From Reason to Ambition Cause: Politics & scientists demand strategies of sustainability e.g. „Roadmap“ of the Business Council for Sustainable Development Problem:WILLINGNESS How to integrate strategies into decisions of different stakeholders? Method: Governance and guidance of the stakeholders Aims:* creation of value * sustainability-oriented benefit for each and every stakeholder * social welfare

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 4 Decision Making and Sustainability – Does it Matter? The „Roadmap“  Groups of actors (vertically) and planning interval (horizontally) => milestones !  Recommendations for activity with economical, financial, architectural etc. reference  No limitations concerning special kinds of usage, building-types or other differences in the character of the project source: *

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 5 Decision Making and Sustainability – Does it Matter? An Example SUSTAINABILITY economical ecologicalsocial energy

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 6 Decision Making and Sustainability – Does it Matter? Detail from the „Roadmap“

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 7 Decision Making and Sustainability – Does it Matter? Responsible Property Investment  Developing or acquiring properties designed with environmentally and socially positive attributes (e.g., low-income housing or green buildings)  Refurbishing properties to improve their performance (e.g., energy efficiency or disability upgrades)  Managing properties in beneficial ways (e.g., fair labour practices for service workers or using environmentally friendly cleaning products)  Demolishing properties in a conscientious manner (e.g., reusing recovered materials on-site for new development)

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 8 Decision Making and Sustainability – Does it Matter? How to put this into practice?

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 9 Decision Making and Sustainability – Does it Matter? Influencers with (Business-) Decisions parameters within the decision making process … related to  motivation & utility assumption  role models  impact on project  proceedings acc. to contract with client rational choice depending on skills + utility actormethod peripherals  Neoclassical economics  New institutional economics  Sustainability economics (1)(2)(3)

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 10 Decision Making and Sustainability – Does it Matter? Classes of Stakeholders … to differ from the actor's role ! owner investor planner seller/buyer advisor lessor/tenant owner investor planner seller/buyer advisor lessor/tenant

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 11 Decision Making and Sustainability – Does it Matter? e.g. Investors' Motivation value-progressionperformancecash-flow categories Motivations and utility assumptions are mostly driven by the actors’ specific characteristics. Each stakeholder may hold several motivations at the same time - but in different degrees of strength. core benefit of any kind of house supplying rooms for shelter and safety supplying technical infrastructure for production and provision of services growth of value by trend especially of significance in connection with urban land (depending on location) monetary benefit by the type of occupancy (tenancy, sale, long lease etc.) cash-flow by operating a building, e.g. assembly hall ? symbolism architecture in respect to art corporate identity by built individualism designing a building as means of promotion protection of historic monuments as a sign for tradit. values

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 12 Decision Making and Sustainability – Does it Matter? The Impact of Rationality on Decisions

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 13 Decision Making and Sustainability – Does it Matter? The Impact of Rationality on Decisions

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 14 Decision Making and Sustainability – Does it Matter? The Impact of Rationality on Decisions

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 15 Decision Making and Sustainability – Does it Matter? The Impact of Rationality on Decisions

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 16 Decision Making and Sustainability – Does it Matter? Peripherals Theory of BehaviourTheory of Organisation neoclassical economics new institutional economics The individual person with his behaviour and preferences is in the main focus of the theory. He always strives for maximizing his profits and therefore presents the initial component for all kinds of mathematical models. => "Homo oeconomicus" Defects, that occur in the system, are adjusted by rules. In order to find a balance between the actors, institutions are installed to create and control penalties, conditions and incentives, e.g. government, jurisdiction. Theory of Integration sustainability economics Still, the actors are in the centre of the theory. But to guarantee satisfaction of all human needs, decisions and activity have to respect and comply with limitations of resources. This is to take into account for the time being AND future generations. source: * Ross 2003: The Role of Decision-Maker Preferences" * Bolle 2001: Advances in Behavoural Economics

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 17 Decision Making and Sustainability – Does it Matter? e.g. Investors' Motivation value-progressionsymbolismperformancecash-flow categories core benefit of any kind of house supplying rooms for shelter and safety supplying technical infrastructure for production and provision of services growth of value by trend especially of significance in connection with urban land (depending on location) monetary benefit by the type of occupancy (tenancy, sale, long lease etc.) cash-flow by operating a building, e.g. assembly hall architecture in respect to art corporate identity by built individualism designing a building as means of promotion protection of historic monuments as a sign for tradit. values CSR corporate social responsibility environmental implications in corporate decisions and strategies social implications in corporate behaviour and investments

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 18 Decision Making and Sustainability – Does it Matter? Influencers with (Business-) Decisions actormethod peripherals (1)(2)(3) actors decisions information / data => sustainability valuation (Whole) lifecycle costs technical due diligence benefit analysis ? certificate

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 19 Decision Making and Sustainability – Does it Matter? The German Certification System

SUSTAINABLE MANAGEMENT OF HOUSING AND REAL ESTATE 20 Decision Making and Sustainability – Does it Matter? The German Certification System

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