The Optimal Time of Renovating a Mall
This 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.
Volume (Year): 9 (1994)
Issue (Month): 1 ()
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- Anderson, John E., 1986. "Property taxes and the timing of urban land development," Regional Science and Urban Economics, Elsevier, vol. 16(4), pages 483-492, November.
- Richard Arnott & Frank D. Lewis, 1977.
"The Transition of Land to Urban Use,"
267, Queen's University, Department of Economics.
- Clarke, Harry R. & Reed, William J., 1988. "A stochastic analysis of land development timing and property valuation," Regional Science and Urban Economics, Elsevier, vol. 18(3), pages 357-381, August.
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