The Optimal Time of Renovating a Mall
AbstractThis paper presents a maximization model determining the optimal time at which a mall should be renovated. The analysis is constructed on the assumption of a decreasing rental income over time as a mall ages. It is then shown that the optimal renovation period achieves a balance between the marginal cost and benefits of delaying renovation. We show how this balance is affected by changes in the discount rate, net rental incomes, and renovation costs. Numerical simulations are used to demonstrate the method of estimating this optimal renovation time and to illustrate the sensitivity of the optimal renovation period to changes in economic factors such as the discount rate, the level and rates of change of renovation costs and rental incomes.
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Bibliographic InfoArticle provided by American Real Estate Society in its journal Journal of Real Estate Research.
Volume (Year): 9 (1994)
Issue (Month): 1 ()
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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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Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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- John Corgel, 2007. "Technological Change as Reflected in Hotel Property Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 34(2), pages 257-279, February.
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