The Quantification of Corporate Real Estate Risk

  • June 21, 2004
  • • Written by: Forrest Huffman, Ph.D.

Summer 2004, Vol 29, No 2

Abstract: The unique nature of corporate real estate decision making is now a well recognized aspect of real estate analysis. The examination and quantification of corporate real estate risk is a fairly recent development in the literature in corporate real estate analysis. This paper extends the current state of the discussion of corporate property risk analysis by developing a basic paradigm for the quantification of real estate risk. We first lay the groundwork for the discussion on risk by beginning with a brief discussion of overall corporate risk considerations. We then extend the discussion to a consideration of corporate real estate risk. We develop the quantification of risk by proposing a scoring or index methodology and offer a few basic examples of how a very simplified index could be constructed. Following these general guidelines can allow consultants in this area to evaluate and quantify the risks of corporate real estate and to adjust those risks in a manner consistent with the overall corporate mission.