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Economies of Scale for Real Estate Investment Trusts

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    Abstract

    Using the translog cost function to estimate economies of scale for a sample of Real Estate Investment Trusts for the years 1992-1994, we find significant evidence that economies of scale exist for REITs for all years examined. The results show that measurement of scale economies is sensitive to the model used for the measurement. Individual characteristics of the REIT, such as type of management and degree of leverage, affect the magnitude of the scale economy. Additional variables accounting for property type diversification and geographic influences have little additional impact on the measured scale economies. Finally, the measured economies of scale for REITs vary considerably over time.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol14n03/v14p275.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 14 (1997)
    Issue (Month): 3 ()
    Pages: 275-290

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    Handle: RePEc:jre:issued:v:14:n:3:1997:p:275-290

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Noulas, Athanasios G & Ray, Subhash C & Miller, Stephen M, 1990. "Returns to Scale and Input Substitution for Large U.S. Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(1), pages 94-108, February.
    2. Allen, Paul R. & Sirmans, C. F., 1987. "An analysis of gains to acquiring firm's shareholders : The special case of REITs," Journal of Financial Economics, Elsevier, vol. 18(1), pages 175-184, March.
    3. McIntosh, Willard & Ott, Steven H & Liang, Youguo, 1995. "The Wealth Effects of Real Estate Transactions: The Case of REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 10(3), pages 299-307, May.
    4. Leonard V. Zumpano & Harold W. Elder, 1994. "Economies of Scope and Density in the Market for Real Estate Brokerage Services," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(3), pages 497-513.
    5. Willard McIntosh & Youguo Liang & Daniel L. Tompkins, 1991. "An Examination of the Small-Firm Effect within the REIT Industry," Journal of Real Estate Research, American Real Estate Society, vol. 6(1), pages 9-18.
    6. McAllister, Patrick H. & McManus, Douglas, 1993. "Resolving the scale efficiency puzzle in banking," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 389-405, April.
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    Cited by:
    1. Helen Higgs & Andrew C. Worthington, 2010. "Economies of Scale and Scope in Australian Superannuation Funds," Discussion Papers in Finance finance:201015, Griffith University, Department of Accounting, Finance and Economics.
    2. Anderson, Randy I. & Fok, Robert & Springer, Thomas & Webb, James, 2002. "Technical efficiency and economies of scale: A non-parametric analysis of REIT operating efficiency," European Journal of Operational Research, Elsevier, vol. 139(3), pages 598-612, June.
    3. Peter Byrne & Stephen Lee, 2007. "Spatial Concentration in Institutional Investment in the UK: Some comparisons between the Retail and Office Sectors," Real Estate & Planning Working Papers rep-wp2007-01, Henley Business School, Reading University.
    4. Stephen M. Miller & Terrence M. Clauretie & Thomas M. Springer, 2006. "Economies Of Scale And Cost Efficiencies: A Panel-Data Stochastic-Frontier Analysis Of Real Estate Investment Trusts," Manchester School, University of Manchester, vol. 74(4), pages 483-499, 07.
    5. John Topuz & Ihsan Isik, 2009. "Structural changes, market growth and productivity gains of the US real estate investment trusts in the 1990s," Journal of Economics and Finance, Springer, vol. 33(3), pages 288-315, July.
    6. Mine Ertugrul & Erasmo Giambona, 2011. "Property Segment and REIT Capital Structure," The Journal of Real Estate Finance and Economics, Springer, vol. 43(4), pages 505-526, November.
    7. Stephen M. Miller & Thomas M. Springer, 2007. "Cost Improvements, Returns to Scale, and Cost Inefficiencies for Real Estate Investment Trusts," Working papers 2007-05, University of Connecticut, Department of Economics.

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