Profitability indicators for performance measurement in real estate development

Purpose The use of suitable profitability indicators for early risk identification is becoming increasingly important in real estate development. A large number of profitability indicators are available for real estate developers. This study examines the role of influencing factors in the choice of profitability indicators for real estate development companies in Europe. The aim of this study is to gain an insight into the decision-making processes in the profitability analysis of developers. Design/methodology/approach An empirical approach was chosen to analyse the profitability indicators, providing a comprehensive snapshot of the use of metrics and influencing variables. The online questionnaire developed contains a combination of single and multiple-choice questions and open-response options. A total of 42 European real estate developers were surveyed as part of the study, 23 of whom completed the questionnaire in full. The analysis of the collected data using descriptive statistical methods, supported by SPSS by IBM, forms the basis of the valuable findings. Findings A total of 34 indicators applied by real estate development companies were identified. The diversity in indicators underscores the nuanced approach taken by industry practitioners, reflecting varied preferences and considerations in their decision-making processes. The results of this study highlight that the choice of profitability indicators has different influences. Correlations were identified in the areas of corporate strategy, professional qualification of real estate developers and their project types. Originality/value The results provide an insight into the multi-layered decision-making processes of European real estate developers in the context of their profitability analyses, in particular, the choice of their profitability indicators. Building on previous studies, many of which have focussed on a national context, a cross-national context has been chosen here. This study contributes to the growing body of knowledge by identifying factors that influence the choice on the basis of the indicators recorded. In this way, it aims to raise awareness of the need to select appropriate profitability indicators in order to avoid misjudgements.