Decision-Making Amid Economic Uncertainty: Exploring the Key Considerations of Commercial Property Investors

Abstract

This study explored the key considerations of commercial property investors acting under conditions of economic uncertainty across the following three dimensions: market fundamentals, institutional, and behavioural factors. Over the past few decades, a series of exogenous shocks to the global economy has impacted property performance, investment volumes, and investor perceptions. Acknowledging that uncertainty further complicates investment decision-making, a mixed-methods research approach was adopted to examine the perspectives of 5 experts and 412 property investors. The findings revealed that, while most investors express negative responses to uncertainty and adopt more cautious attitudes, others are more aggressive and attempt to capitalise on emerging opportunities. Market fundamentals are not the only key consideration; access to information and investors’ behaviour all impact how decisions are made under these conditions. In particular, wealthy and more experienced investors make more comprehensive decisions, considering all three dimensions, while aggressive investors may disregard data in favour of intuition. Behavioural biases such as the bandwagon effect and fear of missing out (FOMO) all influence decisions and are sometimes exacerbated by media narratives. Practically, these considerations underscore the complexity of decision-making under conditions of uncertainty and how different investors attempt to navigate market volatility.

1. Introduction

Property investment decisions are inherently complex, requiring investors to evaluate a wide range of factors, from market fundamentals and asset-specific attributes to broader economic conditions [1,2]. The stakes are particularly high in the commercial property sector, where long-term commitments and significant capital outlays demand careful analysis and strategic foresight [3]. Investors must balance the potential for returns with the risks of asset depreciation, market volatility, and changing regulatory landscapes. This landscape is further complicated in the aftermath of market disruptions, as normative models of decision-making become inadequate and information becomes less readily accessible [4,5].

In response to these market disruptions, asset performance generally dips, and investors allocate less capital to the property sector [6,7]. Fluctuations in interest rates and inflation introduce additional layers of complexity to decision-making considerations as uncertainty rises. Global economic uncertainty levels have risen over recent years in response to a series of exogenous shocks, including the Global Financial Crisis (GFC) of 2007–2008, Brexit, US-China trade tensions, the coronavirus pandemic (COVID-19), geopolitical concerns, supply chain disruptions, and the Russia–Ukraine war in early 2022 [8,9].

A number of studies have examined the performance of commercial property assets in response to economic uncertainty, reporting mostly negative and persistent impacts [4,5,7,10]. However, the underlying decision-making processes and considerations of investors and market participants navigating these conditions remain largely unexplored. This notable gap in understanding is critical because normative decision-making models are insufficient under conditions of uncertainty [4,11]. Further, behavioural biases become more prominent in decision-making as investors adopt more cautious attitudes or augment decision-making with cognitive and mental shortcuts [4]. Similarly, although behavioural biases are now understood to impact irreversible decisions such as capital allocation, the added complexity introduced by unexpected market disruptions suggests that normative models may be inadequate for understanding decision-making motivations and outcomes [4].

In light of these complexities and the gaps in the literature, this study examined the key considerations underpinning investment decisions in Australia’s commercial property space. Australia’s commercial property market provided the ideal testing grounds for this study due to recent market disruptions, in addition to several cash rate hikes by the Reserve Bank of Australia (RBA), and inflationary and cost of living pressures [12]. To provide a comprehensive overview of these considerations, market fundamentals, institutional factors, and behavioural biases were considered based on the opinions of property experts and commercial property investors. By examining the considerations that influence commercial property investors during periods of economic disruption, the current study sheds light on the factors driving investment behaviour in complex and volatile environments. These underlying considerations contextualise the increased complexity of decision-making amid volatile conditions of economic uncertainty. Understanding these dynamics is essential for developing more robust investment strategies and models that account for investor variations and the complexities of property investment.

2. Literature Review

2.1. The Complexities of Property Investment Decision-Making

Property investment decisions are the result of a complex multi-stage process reflecting the key considerations and motivations of the market participants involved [13,14]. Due to the heterogeneity of property assets and the different profiles of investors, each decision is specific within the context of the investor’s expectations and perceptions of market conditions [15]. Theories of utility maximisation and efficient markets reflect a traditional view of decision-making, where market participants are motivated only by underlying fundamentals and exhibit no cognitive limitations [16,17].

However, market imperfections, the principles of behavioural economics, and uncertainty introduce elements of irrationality into decision-making that may shift the central motivations from return maximation towards less rational considerations [2,11]. As markets and investors grow more complex and information becomes more accessible, it has become imperative for investors to consider a broader range of factors in their decision-making [17]. Essentially, the investors’ decision-making framework has become more complex and all-encompassing of economic, property, and behavioural considerations.

Traditional neoclassical models are still the predominant approach, but Royston [18] noted a steady shift towards more flexible models. Roberts and Henneberry [16] report that although decision-making among institutional investors does not appear to deviate significantly from normative models, investors often take shortcuts in the application of these models in an attempt to circumvent real-life complexities and the cost of information. This introduces some bias into the decision-making process, meaning that the process is influenced by sentiment and personal judgement [2,16]. Investors who rely on some degree of sentiment to make decisions in financial markets are usually referred to as ‘noise traders’, often blamed for long periods of sustained mispricing [19,20]. However, Gallimore et al. [21] contended that in property markets, information asymmetry makes the use of behavioural traits in decision-making justifiable.

These dynamics hold true under normal economic conditions, but uncertainty introduces an additional layer of complexity that investors must navigate. Despite all property investment decisions being made under some form of uncertainty due to information asymmetry [1], market disruptions introduce unique challenges that impact investment expectations and increase the reliance on cognitive shortcuts [4,11]. This is understandable given how much performance indicators are impacted under uncertain conditions and the overall cautious attitudes of investors [22].

2.2. Investors’ Key Considerations for Property Investment Decisions

A broad range of factors impact the considerations of property investors, including macroeconomic indicators, property market fundamentals, and institutional frameworks [13,23,24]. These considerations are relevant to property investment decisions because property markets are essentially a network of formal institutions and informal norms operated by imperfect humans [2].

Economic considerations encompassing both macroeconomic indicators and property market fundamentals underpin the most relevant considerations of property investors [3,25]. Macroeconomic indicators such as GDP, interest rates, inflation, and unemployment rates inform much of property investment decisions because of the links between the economy and the property market [3,26,27]. According to Isaac [14], the forces of demand and supply also determine the appeal of property assets and the probability of a successful investment venture. The availability of credit at favourable lending rates and taxation are also key drivers of property investment decisions [3,14]. As proposed by the theory of utility maximisation, the risk-return trade-off is the main consideration for most property decisions, made by individuals attempting to offset minimum risk with the highest attainable returns [3,25]. In the context of commercial property investment, indicators such as returns, prices, and vacancy rates are also important considerations for any investment decisions [25]. Lastly, operating costs and location influence property investment decisions because of the spatial fixity characteristic of the property market and the heterogeneity of all assets [3,28].

Institutional considerations or market inefficiencies also form a major component of property investment considerations due to the imperfection of the property market and limitations to the free flow of information [29,30]. Established inefficiencies, such as information asymmetry and market transparency, limit the applicability of return maximisation assumptions because they inhibit the rationality with which market participants can make decisions [31,32]. This set of considerations is relevant to commercial property investors because it determines access to information, accounting standards, and protection of their interests [33].

Nishiotis [34] identified currency risk, political stability, economic policy, and liquidity risk as the main informal considerations of property investors, further noting that these factors are largely determined by the level of maturity of the specific property market. Additionally, property-specific considerations such as title risk are also key to the ultimate investment decision [3]. These informal considerations generally reflect the strength of the institutional framework in place [34,35], noting that a rigorous institutional framework facilitates more stable market conditions and reduces the relevance of informal considerations [34]. In that regard, informal considerations impact decisions the least in mature and transparent property markets [36,37]. Given the position of the Australian property market as one of the most transparent globally, these informal considerations only marginally impact decision-making [38,39], but new norms may emerge due to rising uncertainty levels.

2.3. Economic Uncertainty and Why It Impacts Investment Decisions

In this context, uncertainty is distinguishable from risk because it represents a situation where the probability of losses is largely unquantifiable due to the nature of the risk factors, a lack of information, or the novelty of certain market disruptions [1]. Despite the pervasive nature of uncertainty, the extant literature distinguishes its impact on performance, highlighting reduced transaction volumes [6], which in turn impact vacancy rates [10], rents and capital values [5,22].

Faced with uncertainties about the economic environment, property investors may delay decision-making or take mental shortcuts to account for the increased risk perceptions [4,11]. The state of the macroeconomy affects the key considerations of commercial property investors [2,11,40]. Van Vuuren [41] linked uncertainty levels to the prospect of irrational decision-making, concluding that market participants display higher levels of irrationality under uncertain macroeconomic conditions. These limits to rationality increase the reliance on behavioural traits when investors have to make high-stakes decisions in the aftermath of market disruptions [42]. Due to the instability of established market fundamentals under conditions of uncertainty, and new norms that emerge in response to an unexpected market disruption, the key considerations of property investors may be entirely different in an uncertain macroeconomic environment [11].

Uncertainty could be generated in response to market disruptions in any of the major sectors of the economy, each of which produces different effects and degrees of persistence [43]. Unexpected shocks to the economy reduce the ability to correctly forecast future movements, resulting in periods of increased uncertainty [44]. Uncertainty in the property market is generally driven by macroeconomic uncertainties [45], and economic indicators such as inflation and interest rates invariably affect investors’ decision-making. These macroeconomic uncertainties influence decision-making because investors are more likely to make intuitive decisions based on their cognitive biases and mental shortcuts over deliberate rational decisions [46].

Despite rising uncertainty levels and the negative impact on performance indicators in the commercial property space [22], much remains to be understood about how uncertainty affects investors and their underlying decision-making processes. This is a critical gap because rational normative models of decision-making are insufficient under these conditions [47], and behavioural biases become more prominent in decision-making when markets are volatile and information is not readily accessible [40]. To address these gaps, this study explored these dynamics and property investors’ key considerations for decision-making under conditions of uncertainty and declining returns. The findings provide insights for a more comprehensive understanding of how investors navigate uncertainty, establishing the importance of institutional and behavioural factors, as well as significant variations based on investor profiles.

3. Materials and Methods

This study adopted a mixed-methods exploratory research design to explore commercial property investors’ considerations and decision-making amid the uncertainty created by recent market disruptions and a series of cash rate hikes by the RBA. Due to variations in perceptions of how uncertainty impacts investment decisions, this research approach was implemented in two phases. In effect, preliminary exploratory expert interviews were conducted to establish overall perceptions of rising uncertainty and to better contextualise the considerations for an online questionnaire survey of active commercial property investors. Figure 1 details the research approach implemented to explore the key considerations of commercial property investors navigating periods of economic uncertainty.

3.1. Data Description

Data collection targeted two groups expected to present distinct decision-making experiences amid heightened uncertainty, property investment experts and commercial property investors. Given the divergent views of investors’ motivations, the opinions of property experts were critical to establish a baseline and identify the factors investors consider relevant when navigating these periods.

These experts were purposively sampled based on their company profiles, experience, and decision-making capacities in various property investment advisory firms. Specifically, five senior executives and director-level experts in commercial property advisory firms were sampled for these exploratory interviews. The least experienced participant had seven years of experience, and their competencies spanned property finance, investment, sales, management, and leasing roles. These criteria were implemented to ensure interactions with experienced professionals who have previously navigated other periods of uncertainty and are currently operating in high-level positions to interact with clients on investment decisions.

Although the five sampled experts participating in these interviews are not representative of the population of property investment professionals, this phase of the research was intended as exploratory, to establish current opinions on investors’ decisions under volatile economic conditions [48,49]. Moreover, this phase started without a definitive upper limit, and interviews were conducted until a point of saturation was reached [48]. Similar studies on property investment decision-making have also proposed ideal sample sizes of 5 to 10 interviewees to reach a point of saturation [17,35,50]. All interviews were organised via the Zoom video conference platform and lasted approximately 45 min each. Subsequently, the audio recordings were transcribed and analysed based on the emerging themes.

Table 1. Profile of Property Experts (Exploratory Interviewees).

Code	Role	Experience
E1	Director (Property Investment Consultancy)	12 years
E2	Director (Property Investment Consultancy)	18 years
E3	Director (Property Finance Advisory)	7 years
E4	Senior Executive (Property Sales and Leasing)	7 years
E5	Manager (Property Sales, Leasing, and Management)	15 years

presents the anonymised profiles of these interviewees.

Following the exploratory expert phase, which highlighted investors’ attitudes toward decision-making amid uncertain economic conditions, an online questionnaire survey was designed and administered via the Qualtrics platform to active commercial property investors in Australia. In the absence of a publicly accessible database of commercial property investors, this study reached respondents through existing databases of supporting institutes and private firms. These institutions retain databases of their clients and property investors for periodic surveys and to disseminate educational content on investment strategies and economic trends. This approach is a staple of online surveys and provides a streamlined method for identifying and contacting research participants [51], as well as representing a cost-effective data collection technique [52].

The largest single database size of these supporting institutes was 12,000 property investors (residential and commercial). Keeping in mind that some investors subscribe to different databases concurrently, multiple responses were blocked in the survey. The online questionnaire remained live for a two-month period at the end of 2023, during which time inflation had peaked in Australia [53], and the general discourse for property investors revolved around uncertainty. The recruitment materials were sent to the investors by the supporting institutions via their email addresses, followed by one reminder email to maximise participation.

A total of 2012 responses were recorded at the end of the data collection period, of which 412 were valid and complete. Respondents provided demographic information, details of their investment experience, and their perspectives on rising uncertainty. Regarding their investment decisions under volatile economic conditions, respondents rated key considerations on a 5-point Likert scale and provided open-ended responses. Due to the busy schedules of the targeted respondents, as noted by experts in the preliminary exploratory interviews, ten respondents were subsequently awarded gift cards in a random prize draw. These financial incentives aimed to enhance participation in the online survey, and the existing literature also indicates no decline in the quality of responses due to incentives [54].

Table 2. Profile of Commercial Property Investors (Questionnaire Survey).

Variable		Frequency (n = 412)	Percentage (%)
Age	18–24	16	3.9%
	25–34	215	52.4%
	35–44	151	36.8%
	45–54	21	5.1%
	55–64	6	1.5%
	Above 65	1	0.2%
Gender	Male	253	61.9%
	Female	146	35.7%
	Non-binary	3	0.7%
	Undisclosed	7	1.7%
Education	No formal qualifications	5	1.2%
	High school/Diploma	103	25.2%
	Bachelor’s	178	43.6%
	Master’s/Postgraduate	122	29.9%
Annual Salary	$1–$50,000	3	0.7%
	$50,001–$100,000	73	17.7%
	$100,001–$200,000	84	20.4%
	$200,001–$350,000	110	26.7%
	$350,001–$500,00	112	27.2%
	Above $500,000	25	6.1%
	Undisclosed	5	1.2%
Experience	0–5 years	144	35.0%
	6–10 years	214	51.9%
	11–15 years	37	9.0%
	16–20 years	8	1.9%
	Above 20 years	5	1.2%
	Undisclosed	4	1.0%
Sectors *	Office	157	34.80%
	Retail	172	38.10%
	Industrial	122	27.10%
States *	NSW	81	15.90%
	QLD	110	21.70%
	SA	54	10.60%
	VIC	73	14.40%
	WA	66	13.00%
	TAS	46	9.10%
	ACT	47	9.30%
	NT	31	6.10%

Note: * denotes multiple-response questions. Respondents were allowed to choose multiple options, so the total number of responses was more than 412.

presents a profile of the respondents in this study.

3.2. Methodology

This study explored the key considerations of commercial property investors making decisions under conditions of economic policy uncertainty by operationalising the two following phases: preliminary exploratory interviews with property experts and an online questionnaire survey of investors. The preliminary exploratory interviews contextualised the study, identified major issues to consider, and informed the design of the online questionnaire survey. These initial interviews posed open-ended questions on the key considerations of commercial property investors under normal and uncertain economic conditions, why there might be variations, and the preferred strategies in place to navigate uncertainty, if any. This is an established approach in similar studies on property investment because interviews facilitate the in-depth discussion on decision-making behaviour [55]. Further, the extant literature on decision-making behaviour in the property market suggests a focus on experts or high-level decision-makers [17,21]. Subsequently, several analysis techniques were implemented to identify investors’ considerations in response to major market disruptions and their decision-making concerns.

3.2.1. Thematic Analysis

This study followed Kumar and Ranjit’s [56] recommended 4-step process for thematic analyses—identifying main themes, assigning codes, classifying responses under the main themes, and integrating themes. Using NVivo software (Version 14), the recurring themes and concerns of property experts were identified and highlighted to address different dimensions of decision-making [56,57]. In addition to the intuitive nature of this approach, thematic analysis also minimises researcher bias in drawing connections between the main recurring themes [56,57,58].

After importing these responses into NVivo software, all the responses were read in detail to identify keywords and recurring sentiments. The inclusion criteria were limited to word lengths of at least 3 and the top 200 most frequently used words. The overall sentiment of responses is highlighted in the subsequent discussions, which are further supported with key excerpts from the interviews to highlight the extent of issues and the general approach to decision-making under conditions of uncertainty.

3.2.2. Exploratory Factor Analysis (EFA)

Considering the unique nature of the market disruptions motivating this study, such as the long-term effects of the COVID-19 pandemic and inflationary concerns, exploratory factor analysis (EFA) was conducted to define underlying patterns in how investors approach decision-making when the outlook is unclear. As established by Fabrigar and Wegener [59], this analytical technique is ideal in the absence of an established theory. Particularly in this study, which explores the emerging thought patterns of investors and the behavioural biases motivating their decision-making under uncertain economic conditions, EFA provided a framework within which emerging themes could be categorised [60].

Fabrigar and Wegener’s [59] checklist was implemented to establish the suitability of the dataset for thematic analyses, extract and retain factors, determine the ideal rotational method, and label these themes for further discussion. The Kaiser-Mayor-Olkin (KMO) and Bartlett’s tests of sampling adequacy and sphericity are presented in

Table 3. KMO measure of sampling adequacy and Bartlett’s test of sphericity.

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.		0.70
Bartlett’s Test of Sphericity	Approx. Chi-Sq.	361.51
	df	105
	Sig.	0.00

. With a sampling adequacy of 0.70, which is above the recommended minimum of 0.60 [61], the dataset was deemed suitable for EFA. Bartlett’s test of sphericity also produced an approximate Chi-square value of 361.51, significant at 1%, indicating that the matrix is not an identity matrix [62].

Based on an examination of the scree plot in Figure 2, five factor clusters with eigenvalues greater than 1 were retained for further analyses [60,62,63]. In this plot, factor clusters which tailed off after the breakpoint at 1 were excluded due to their low eigenvalues [61]. These factor clusters explained 48.68% of the total variance in investors’ key considerations amid conditions of heightened uncertainty, detailed in

Table 4. EFA (total variance explained and eigenvalues).

Component	Initial Eigenvalues			Rotation Sums of Squared Loadings
	Total	% of Variance	Cumulative %	Total
1	2.229	15.922	15.922	1.485
2	1.234	8.816	24.738	1.368
3	1.173	8.376	33.114	1.352
4	1.122	8.013	41.127	1.324
5	1.058	7.555	48.682	1.287
6	0.996	7.114	55.796
7	0.925	6.609	62.405
8	0.869	6.207	68.612
9	0.859	6.139	74.751
10	0.795	5.677	80.428
11	0.748	5.34	85.768
12	0.708	5.057	90.826
13	0.655	4.676	95.501
14	0.63	4.499	100

. The rotated component matrix was then analysed to define the main themes of property investors’ considerations under conditions of economic uncertainty [59]. Factor loadings less than 0.40 were suppressed at this stage to prioritise the most prevalent themes and prevent cross-loading across factor clusters [63].

3.2.3. Analyses of Variance (ANOVA)

After exploring the key options of experts and investors, and establishing the main themes underlying the key considerations, ANOVA analyses also highlighted how different investors’ perceptions shape their decision-making [64]. In particular, this study explored how different investor traits influenced their opinions on the following three key dimensions of decision-making: market fundamentals, institutional factors, and behavioural biases. These variations were analysed based on wealth, experience and risk appetite. In addition to providing some context for the diverse approaches towards decision-making amid uncertain conditions, these analyses also highlighted the complexity of decision-making.

4. Results and Discussion

4.1. Experts’ Perspectives on Investment Decisions Amid Heightened Uncertainty

4.1.1. Overall Attitudes Towards Heightened Uncertainty

Although there were diverse definitions of uncertainty, experts generally acknowledged that the media and investors alike treat uncertainty as a black box of sorts, classifying all novel risk factors as uncertainty. To a certain extent, this aligns with the broader literature on decision-making amid economic uncertainties, with most market participants conceding that most decisions must be made under some form of uncertainty due to information asymmetry and the very nature of the property market [1,65]. With property performance widely expected to dip in response to increased uncertainty [7], investors favour cautious decisions to consolidate their positions. Additionally, the unpredictability of future returns and macroeconomic movements also impact investors’ expectations and decision-making [4].

The inherent complexity of property investment in the aftermath of major market disruptions is amplified by several facets of the asset class, such as high capital requirements, illiquidity, and the irreversibility of decisions [12,66]. Under these conditions, cognitive biases also become more prominent in decision-making, and investors grow more cautious in an attempt to avoid or reduce potential losses [4,47]. This negative overall sentiment in response to heightened uncertainty was reflected in the property experts’ responses:

“Look, very challenging in the capital markets… For lack of a better word, you know, people are sort of sitting on their hands at the moment. We get a lot of people who are very speculative or really trying to pick up a good deal… It’s still slowly building. There’s a real, real lack of confidence in the market from purchasers in that they just don’t know what the RBA is going to do next due to inconsistencies, I think, with the messaging that the RBA is putting out. It’s just really not giving anybody any confidence in where the next sort of 12 months is going to end up, and that’s really affecting their ability to purchase commercial property at the moment.”

(E4)

Beyond the market fundamentals underpinning decision-making, a recurring theme based on the experts’ opinions suggests that investors are most affected by expectations of the future and the level of confidence with which major strategies can be executed. Considering how aggregate demand is volatile to exogenous shocks [67], a shift in focus to investor perceptions may sustain demand amid heightened uncertainty levels. Two distinct perspectives on how uncertainty affected investment decisions also emerged, suggesting that interest rate movements impact investors’ real capacity to borrow, while the uncertainty surrounding future monetary policy decisions results in more cautious decision-making. More than the rates or economic pressures, it seems to be the lack of clarity on future movements that impacts investors’ decisions and capital allocation [42].

“It (uncertainty) definitely affects it (investment decisions). It affects it from, in my opinion, two perspectives. Obviously, the first major way it will affect your capacity is by the bank simply limiting the amount that you can borrow based on interest rates and buffers, that’s number one. Number two, in a climate where people don’t know or can’t be sure about what’s happening in the future, generally, they’re a bit more conservative.”

(E3)

“Obviously, interest rates, of course, going up affects the market. There’s no doubt about it. That’s what’s caused this. But if vendors’ expectations, if they knew where the market was going and they are coming to market, then they’re going to know what to accept. But because of the uncertainty that’s coming out there, some buyers are still purchasing at a lower cap rate… whereas if we had a lot more certainty of where interest rates are going, I think market expectations would be a lot clearer, and we would have a better understanding.”

(E4)

4.1.2. Investor Behaviour and the Role of the Media

These expectations are further fuelled by the media, with buzzwords capable of creating and sustaining narratives about the state of the economy and the future of performance indicators [4,68]. In particular, the interplay between traditional and social media is noticeably more pronounced amidst crisis periods [68], and narratives on the threat of recessions can impact investor confidence [69]. Allan et al. [6] reported significant performance declines in the aftermath of the COVID-19 pandemic and reduced investment activity in response to market disruptions. The pursuit of returns by largely risk-averse investors can impact decision-making and investor preferences when the property market outlook is unclear [70].

Regarding the role of the media specifically, E1 suggested that “they (investors) would all say the same thing because that’s what the media was saying and that’s what was going around the forums”. This reference to monetary policy and uncertainty on the interest rate hikes underscores how much of an impact macroeconomic movements have on property investments, and how the media influences perceptions and decisions.

“A lot of them, you know, it’s just so much in the newspaper. These days, the information is so readily accessible there. Almost everyone’s got their own opinion of what’s going to be happening in the future based on their gut feeling, what they read in the newspapers, (and) what they see on social media. People that [sic] are interested in that sort of thing are prepared to do a bit of research on their own and have enough to care about it, you know. So those people generally make their own decision or have their own idea around where they think rates are going to go in the future.”

(E3)

“What we do seem to notice a bit of a trend of is that when the RBA put interest rates up, the first week to 2 weeks, and we notice a drastic difference in our inquiry levels, compared to the next to the last 2 weeks before they have the next meeting. So it seems to be—if they put the interest rates up, then the first 2 weeks, it just takes a lot of heat out of the market. And you see you, you still get inquiries, but it does not noticeably drop off. And then the following, the proceeding, 2 weeks, they all start to pick back up again. So it’s almost as if you know, people get scared and concerns that. you know. Okay, interest rates are going up again like, I’m out of the property market. And then it’s like, you know what, I can still afford to buy a property. I can still go do this. I’m going to start inquiring again, It’s a weird mental shift, I think, for a lot of people.”

(E4)

Under these conditions, it is unsurprising that most investors’ predictions do not align with the economic data and expected trends. Another investment expert echoed this view in the context of financing costs and monetary policy decisions, even to the point of making questionable investment decisions:

“Everyone’s crystal-balling it. You know, everyone’s got their predictions on how many rate rises, where cap rates and costs of capital are going to halt but clients are still doing things, probably the more strategic. (There are) some where you scratch your head, you know—Why are they buying that?”

(E2)

Market fundamentals are not the only relevant consideration either, and behavioural traits become more crucial under conditions of increased volatility and uncertainty. In response to the most important considerations of investors, E1 suggested that:

“So I’d say, for the majority of investors; sentiment of the market. And what other investors are doing is paramount. It’s probably the biggest one. No, people don’t want to be outside. People don’t want to do something outside the herd, because they feel like they can get burnt.”

(E1)

Uncertainty clearly magnifies the consequences of irreversible investment decisions, resulting in more cautious decision-making and an increased focus on cognitive constraints [22,71]. Herding emerges as a cognitive bias in these situations, characterised by investors relying on the actions of others and prioritising herd behaviour over independent analysis [72]. These contrasting considerations and investing habits amid conditions of uncertainty necessitated further insights from investors to explore decision-making behaviour under extreme economic pressures.

4.2. Investors’ Decision-Making Considerations Amid Heightened Uncertainty

Across the broad themes of economic, institutional, and behavioural considerations explored in this study, the overall sentiment of investors making decisions amid uncertain conditions was largely negative [4,40,47]. The most prominent areas of concern cited reflect uncertainty over the central bank’s monetary policy decisions and future interest rate movements, mirroring recent spikes in global uncertainty levels due to the same issues [8,9]. Demand and supply also emerged as a significant consideration, and most investors opted for cautious strategies, choosing to ‘wait and see’ how the market and other investors react [69,73]. These specific comments underpin those concerns:

“An uncertain monetary policy and interest rate environment may cause commercial real estate investors to have difficulties in forecasting borrowing costs and future cash flows.”

(R569)

“Economic uncertainty may cause commercial real estate tenants to adopt a wait-and-see approach to signing long-term leases, which may affect the stability and sustainability of commercial real estate.”

(R555)

“There may be an imbalance between supply and demand in the commercial real estate market, leading to an increase in vacancy rates.”

(R64)

Despite the overall cautious reaction to economic policy uncertainty, some investors attempted to capitalise on emerging opportunities to gain an advantage amid waning demand and competition levels. Notably, some experienced and aggressive investors actually considered heightened uncertainty as an opportunity for additional returns, going against the herd to reposition their portfolios. Flight to safety may be the core reason for investors’ reduced activity under conditions of economic uncertainty [74], but it also explains why investors are incentivised to increase their property portfolios under these conditions [75]. These positive comments balance out the negativity regarding investments amid uncertainty and highlight investors who regard these periods as opportunities to adapt and reposition their portfolios. One such investor (R2000) perfectly summarised this mindset, saying, “Property will always be well regarded in Australia, regardless of times of uncertainty, I just ride out the bad times”. In reference to uncertainty as an opportunity to adapt [4], another investor opined that:

“Technology and digital transformation are changing the way the commercial real estate industry operates. For example, the rise of e-commerce could have an impact on the retail property market. The commercial real estate industry needs to adapt to these changes and seek new business models and opportunities.”

(R51)

Figure 3 summarises the key themes impacting investment decisions, presented as a word cloud of the most frequently recurring 200 words. The cautious attitude of investors and the increased focus on the economy, demand, interest rates, and tenant security emerged as prominent nodes. Financing costs and funding costs for acquisitions and developments were also prominent concerns, as noted by investors who cited increased costs of finance as a significant barrier to their decisions. By raising the default risk premium [76], economic uncertainty diminishes investors’ borrowing power and impacts investment prospects. Delaying decisions and ‘wait and see’ strategies also seem popular among investors unsure of how future economic movements will impact their investments. Due to the irreversibility of these decisions, investors acting under uncertainty may choose to delay major investment decisions until the outlook is clearer [69,73]. This broad spectrum of investors’ key considerations reflects the added complexity of decision-making amid conditions of uncertainty, and the need for a more nuanced approach to integrating market fundamentals and behavioural considerations. For property experts in advisory positions, these variations establish how investors’ diverse motivations based on specific investors’ profiles and risk appetite could facilitate better decision-making.

From these broad opinions, further thematic analyses revealed several key codes and themes underscoring the considerations of commercial property investors when the economic and policy outlooks are unclear. Figure 4 conceptually maps these themes to draw connections between investors’ attitudes towards uncertainty.

4.3. Underlying Themes in Property Investors’ Key Considerations

Investment decisions should be based entirely on market fundamentals in perfect conditions, but limits to rationality under uncertain conditions and information asymmetry inhibit investors’ capacity to do so [77]. The extant literature on property investment decision-making establishes a focus on market fundamentals and rational decision-making under normal economic conditions [24,25]. The risk-return relationship underpins these decisions, but investors also display higher levels of irrationality amid conditions of uncertainty, which further increases cognitive and behavioural biases [4,41,42]. This nuanced approach to decision-making in different economic climates is reflected in investors’ key considerations, spanning fundamentals and institutional factors augmented by cognitive biases [2,24,78]. The factor clusters presented in

Table 5. Factor clusters defining investors’ key considerations amid uncertainty.

Factor Cluster	Key Considerations	Factor Loading
Market dynamics and regulations	Regulations and restrictions	0.629
	Property fundamentals	0.519
	Economic conditions	0.494
Investment viability	Information transparency	0.658
	Risk/return profile	0.638
	Inflation hedge	0.521
Competitive positioning	Competition (other investors)	0.628
	Liquidity	0.512
	Intuition	0.495
Revenue stability	Tenant security	0.690
	Access to finance	0.663
Social conformity	Bandwagon effect	0.623
	Fear of missing out (FOMO)	0.613

convey the complexity of property investors’ considerations, particularly under uncertain economic conditions and volatile expectations.

The first factor cluster, market dynamics and regulations, highlighted investors’ focus on economic conditions, property fundamentals, and the regulatory framework. Property fundamentals are critical for investors to assess the intrinsic value of assets based on location, cashflows, and demand-supply dynamics [3]. This is doubly important when the economic outlook is unclear, as any long-term investments may become less viable in response to volatile conditions and declining performance of certain asset classes or locations [4,22]. Heightened volatility and perceived risk levels reinforce economic conditions as a key consideration to gauge future movements of interest rates and inflation to make strategic allocation decisions [4,27]. The direct impact of regulatory frameworks and policies on property performance remains underexplored [22], but monetary policy and tax considerations are especially critical for investors amid uncertainty. After a series of interest rate hikes in response to inflation levels, property transaction volumes dropped by over 32% in the Asia-Pacific region due to increased risk perceptions [6]. This overall trend understates the allocation decisions of more aggressive and risk-averse investors, who reported capitalising on these conditions to increase their holdings, acquire underpriced assets, or integrate emerging technologies. Transparent and supportive regulatory frameworks are critical to fostering investor confidence under uncertain economic conditions, and unpredictable policy changes only exacerbate market volatility and deter long-term investment.

Information transparency, the risk-return profile, and the inflation hedging capacity of assets were loaded onto the second factor cluster, investment viability. Collectively, this cluster revolved around key considerations investors may prioritise to evaluate the potential success and sustainability of their investments. Information availability and transparency are especially crucial in this regard because they directly impact investors’ ability to make informed decisions in asset selections and emerging opportunities [33]. Arguably, this consideration is always central to property investment decision-making. However, Zhang et al. [79] established information asymmetry as a significant moderator between cognitive biases and investment decisions. This relationship may encourage investors to base decisions on the herd or their own intuition when new information is unavailable. The risk-return profile of assets, which form the basis for decision-making under normal conditions, may be less relevant under uncertain conditions as expectations shift and markets become more volatile. Notably, investors’ concern about safeguarding their investments against inflationary pressures may encourage them to favour historically stable asset classes, which could explain the significant capital reallocation from retail to office and industrial sectors in the aftermath of the COVID-19 pandemic [6].

The third factor cluster concerns competitive positioning, which encompasses considerations such as competition with other investors, liquidity, and intuition. This cluster addresses how investors seek liquidity, incorporate other investors’ actions, and leverage their own insights to navigate the uncertain landscape. Beyond the market fundamentals and data-backed decision-making process, cognitive biases such as herding and intuition all emerge as prominent shortcuts for investors making irreversible decisions [4,79]. Liquidity is another key consideration, reflecting the investor’s need for flexibility and the ability to exit or adjust positions as markets become more volatile under conditions of economic uncertainty [80]. For investors, competitive positioning reinforces the need for a balance between adaptability and strategic foresight in navigating uncertain economic conditions. Drawing on recent capital allocation trends in the commercial space in response to rising uncertainty following the COVID-19 pandemic, this factor cluster is more prominent amid volatile economic conditions due to the irreversibility of investment decisions and the capital requirements of asset acquisition [12,66].

The fourth factor, revenue stability, pointed to tenant security and access to finance as key considerations for stable performance in volatile economic conditions. Particularly in response to increased vacancy levels and reduced transaction volumes observed in the aftermath of COVID-19 [10], tenant retention and lease reliability become critical conditions in uncertain climates. As reported by Jackson and Orr [4], this consideration is among the most critical to the investment decision-making process and only gains more priority when uncertainty is high. Evidently, investors with ready access to finance in the form of traditional lenders and private equity are better positioned to weather periods of financial volatility as activity levels and occupancy rates fluctuate.

The final factor cluster, social conformity, further emphasised certain external influences that impact investor behaviour during periods of uncertainty, the bandwagon effect and fear of missing out (FOMO). These two considerations refer to the tendency of investors to base their decisions and choices on the dominant narrative of the market, particularly when they are unsure of future movements [72,81]. The emergence of these behavioural biases as key considerations amid uncertain conditions further validates the role of the human element in decision-making and the nuances of navigating different economic climates [4,77]. Despite conventional knowledge that most major decisions are influenced by emotions to a certain extent, identifying these biases is crucial to objective decision-making for property investors.

4.4. Varying Investor Perspectives on Key Considerations Amid Heightened Uncertainty

Significant variations also emerged between investor characteristics and decision-making considerations, providing some more insights into the nuances of navigating volatile economic climates. These traits—wealth, experience, and risk tolerance—are crucial in shaping how investors interpret uncertainty and determine viable investment strategies.

The relationship between wealth and investor decision-making under economic uncertainty revealed a stark contrast between investor groups, as shown in Figure 5. For the least wealthy investors, behavioural considerations exert more influence than fundamental and institutional factors, suggesting that psychological drivers such as FOMO and herd behaviour are particularly impactful in shaping their decisions. In contrast, the wealthiest investors display a more balanced consideration of behavioural, fundamental, and institutional factors. There are some clear connections between this trait and funding opportunities, as investors with more access to private equity are better positioned for periods of uncertainty, even if demand wanes and transactions dip [4]. For less wealthy investors, the pronounced influence of behavioural considerations suggests that they may be more prone to emotional decision-making, potentially leading to suboptimal outcomes during periods of economic uncertainty [72,81].

Experience was another statistically significant source of variation in investors’ key considerations, as shown in Figure 6. Less experienced investors tend to view behavioural, fundamental, and institutional factors as equally significant, which suggests that their decision-making is more holistic but perhaps less refined. This lack of differentiation could reflect a limited ability to prioritise factors in a given economic context, leading to a more generalised approach to decision-making. On the other hand, investors with 15 or more years of experience were very selective in key considerations, focusing predominantly on institutional factors and fundamentals. Investor experience impacts decisions and risk-taking behaviour, particularly when no new information is available [82]. As expectations diminish with rising uncertainty levels, experienced managers and investors can leverage past strategies to navigate decision-making while novice investors panic and are swayed by the market. Similarly, investors’ knowledge of property markets through experience can limit their tendency to make subpar decisions, instead focusing on market fundamentals regardless of uncertainty levels [83].

Risk appetite also emerged as a moderator of investors’ considerations for decisions made amid conditions of uncertainty, as shown in Figure 7. Conservative investors, who place greater importance on all three dimensions—fundamental, institutional, and behavioural considerations—tend to approach uncertainty with caution. This suggests that conservative investors are likely to be more thorough in their analysis, relying heavily on these factors to mitigate risk [84]. As a result, they may favour safer, well-researched investments and strategies that align with their risk-averse nature. This approach tends to prioritise capital preservation and long-term stability over short-term gains. Given the overall cautious sentiment of investors in response to uncertainty, these strategies may be the prevailing preference of investors [35,36]. Aggressive investors perceived all three dimensions as less critical to their decisions, instead preferring to make decisions based on intuition as uncertainty increases. Practically, conservative investors may benefit from strategies based on risk diversification and steady income-generating assets. Conversely, aggressive investors might gravitate toward more speculative investments with higher volatility, potentially giving less emphasis on traditional market analysis and more on timing and market sentiment [85].

5. Conclusions

Exploring property investors’ decision-making under conditions of economic uncertainty, this study examined the key considerations that underpin investment decisions during periods of high uncertainty in response to inflation and a series of aggressive monetary policy decisions. Despite a growing body of literature examining asset performance under these conditions, significant gaps remain in the underlying decision-making considerations of investors. Further complexities are introduced by the emergence of new norms and the investors’ overreliance on cognitive shortcuts as expectations decline in response to market disruptions. Within the Australian context, these findings are a timely examination of decision-making in response to unprecedented uncertainty due to rising inflation, interest rates, and costs of finance, in addition to diminishing optimism levels and capital allocation.

This study employed a mixed-methods exploratory research design to investigate the considerations and decision-making processes of commercial property investors in Australia. The research approach was operationalised in two distinct phases to establish a comprehensive understanding of the state of the commercial property market and investor response to uncertainty. In the first phase, exploratory expert interviews were conducted with five seasoned property investment advisors, each with seven or more years of experience, to gather insights into the prevailing perceptions of market uncertainty and to contextualise the factors influencing investment choices. These interviews were thematically analysed to identify key trends and considerations, which then informed the design of an online questionnaire. In the second phase, 412 active commercial property investors provided their perspectives on decision-making amid uncertainty and their key considerations for navigating these periods. The data from this survey were analysed using EFA and ANOVA to uncover the underlying themes and to examine how these considerations vary among investors based on their wealth, experience, and risk tolerance.

The findings reveal a nuanced investor landscape shaped by varied responses to market disruptions. From the expert interviews, it became clear that the overall trend is to grow more cautious as investors adopt wait and see approaches. Phrases such as “sitting on their hands” underscore these attitudes, but some investors also attempt to capitalise on emerging opportunities by repositioning their portfolios or adapting to new technologies. The role of media and the proliferation of buzzwords also emerged as critical aspects, as investors increasingly rely on news outlets to gauge the economy and forecast future market movements. In this climate, some investors may fall into herding behaviour, making suboptimal and sometimes irreversible decisions not grounded in data but driven by the perceived consensus.

From the investors’ perspective, while many recognise the growing complexity of decision-making under uncertainty, a few dismiss these concerns, confident that “property will always be well-regarded”. The study identified five dimensions that shape investor considerations, extending beyond traditional market fundamentals to include information efficiency, competitive positioning, stability, and social conformity dynamics. Wealthy and more experienced investors tend to make more comprehensive and data-driven decisions, less swayed by behavioural biases. In contrast, aggressive investors, despite market volatility, are more likely to take on additional risks and rely heavily on intuition when navigating uncertain economic conditions. These contrasting perspectives suggest that investor strategies and outcomes are significantly influenced by their experience, risk appetite, and the evolving market environment, with important implications for how they approach uncertainty.

This study provides comprehensive insights into property investors’ approaches to navigating economic uncertainty based on self-reported data, which may not fully capture the real-time complexities of decision-making. Particularly, the findings of this study are only generalisable to comparable property markets in terms of maturity and transparency. Investors in less efficient markets may focus on different considerations as they attempt to navigate volatile periods, which may also heighten the impact of behavioural biases. Future research could also benefit from employing direct tracing methods, such as observing investors making decisions in real-time under varying market conditions, to provide a more granular understanding of their behaviour. Additionally, tracking the outcomes of different approaches and strategies could yield valuable insights into how investors’ preferences and behaviours can be optimised for more precise decision-making under uncertainty. Such approaches would offer a more dynamic perspective, enabling better guidance for investors making irreversible decisions in complex market environments.