Editorial

Citation

Akintoye, A. and Birnie, J. (2010), "Editorial", Journal of Financial Management of Property and Construction, Vol. 15 No. 1. https://doi.org/10.1108/jfmpc.2010.37615aaa.001

Editorial

Article Type: Editorial From: Journal of Financial Management of Property and Construction, Volume 15, Issue 1

In most issues of the journal, there is no intention to have a theme or topic which links some of the papers. That this does happen quite often by chance shows that financial management of property and construction has a number of common threads. In this issue, three of the papers show how good cost design planning can also be of benefit in subsequent life cycle cost control.

Whilst the construction industry generally has not reached the stage of manufacturing and exporting buildings overseas, property developers are increasingly using their expertise to develop in other, usually less developed countries. The motivation for this is usually the potential of a good investment return. This may be in part due to cheap labour and the availability of worthwhile material resources in the host country. The paper, by Abdul-Rashid Abdul-Aziz and Ahmed-Usman Awil, presents their research of Malaysian Housing Developers working in Southern Africa, South Asia, Australasia and South East Asia. The approach taken is to investigate the factors which may not be conducive to investment in the host country rather than concentrate on the potential advantages. An extensive literature identifies these potential disadvantageous factors. The research used both qualitative and quantitative techniques. Results from questionnaire were followed up by interviews. The results are presented. The most important factors were found to be the political set up, land factors, banking system, local development laws, taxation and policy regarding foreign investment.

The use of public private partnerships has become a well-established procurement method throughout the world. The paper, by Thillai Rajan Annamalai, Siddarth Ravichandran and Mukund Subramanaian Padmanabhan, considers the use of this procurement system to the less common situation of a road improvement project in India. The authors describe in detail the political, technical and financial basis of the renovation and maintenance to the East Coast Road project. Data for the research were obtained from project documentation, field observations and in depth interviews. A description of and the rationale for the 30-year concession period is given. In describing the nature of the work, the authors point out that less risk was involved in upgrading an existing road compared to the possible problems of a new road. Also because the total cost was not excessive, there was less need for additional syndicate support. The paper gives a detailed summary of the advantages of using the adopted procurement system, not least was that the project was completed on time and to budget. The open disclosure regarding the financial structure of the project is very helpful.

Maintenance costs of a building have traditionally not received the same extent of cost study examination as that of new buildings. This is despite the fact that the maintenance costs over the life of a building can often approach the original building cost. The paper, by Nayanthara De Silva and Malik Ranasinghe, investigates the various factors which contribute to maintenance problems. The paper relates to housing stock in Sri Lanka and the authors first give a history of the problems with maintenance of public housing in the country. The authors then present a proposed framework for maintainability. The paper then identifies the various maintenance problems and also the risk factors associated with same. To obtain data for analysis, a questionnaire was used which enabled buildings to be classified according to size, height, number of storeys and occupancy nature. A total of 55 risk factors related to design, construction and maintenance were identified, The results are presented, including statistical analysis to show those risk factors considered significant and they are then discussed. Industry action, and design procedures which could help reduce likely maintenance problems and their cost are listed. Finally, the development of a maintenance programme is put forward which would also include a life cycle cost strategy. Overall, the paper presents a useful manual for use by others.

The use of factor cost indices has been used by Chartered Quantity Surveyors, mostly in the UK, for many years. The paper, by H.K. Gichunge, S.M. Masu and O.A. K’Akumu, looks at how it is being used in Kenya generally, and in particular in relation to the city of Nairobi. The paper examines the appropriateness of the two organisations which compile factor cost indices within Kenya namely the Central Bureau of Statistics and the Joint Building Council. The authors describe the potential uses of the data but found the application of these to be limited. The failure to use cost indices at design stage to predict future life cycle costs is highlighted. The authors conclude that the limited use of the indices is largely due to its failure to differentiate local and regional cost differences, particularly that between constructing in rural areas and a city such as Nairobi. Also the fact that the indices are limited to only certain materials and to labour is a major limitation which needs to be addressed.

The final paper, by Kim Hin/David Ho, Eddie Chi Man Hui and Huiyong Su, considers how the use of fuzzy set theory could improve decision making in international and direct real estate investment. The role of intuitive judgement making is crucial to the process of real estate decision making. For readers unfamiliar with fuzzy set application, the process is explained in reasonable detail. The paper begins with the authors highlighting and discussing the limitations of existing asset allocation models. The literature review includes views on Markowitz modern portfolio theory pointing out its shortcomings. The authors then discuss various alternative asset allocation models in use. These include fuzzy tactical asset allocation (FTAA) models developed by Zimmermann and robust programming models by Ramik and Rimanek. This is followed by the authors’ own work based on ten Asia Real Estate Far East markets data from Jones Lang LaSalle. The results of the two key FTAA models are presented, discussed and compared with their corresponding office portfolio results. A lengthy conclusion discusses the findings of the different models used by them and highlights the benefits of the fuzzy approach to the subject.

As this issue is the first for 2010, the editors and publishers once again wish our readers and authors a happy new year. Already, we are in the second decade of the new century and the changing nature of papers received for publication is noted. The increasing specialised nature of many papers is to be expected. However, as this journal attempts to bring together financial management of both property and construction, the editors are particularly keen to receive papers which bring the two functions closer together.

Akintola Akintoye, Jim Birnie