A Reexamination of Economies of Scale in the Management of Real Estate Investment Trusts

摘要

With improvements in employment and housing markets post-credit crisis, real estate investment trusts (REITs) have sought to improve the quality and productivity of their portfolios by increasing their merger and acquisition activity across all property types. As the REIT industry has consolidated, we aim to evaluate whether this consolidation from 2012 to 2017 provides economies of scale gains for the management of REITs across seven REIT categories: diversified REITs, hotel and resort REITs, health care REITs, office REITs, residential REITs, retail REITs, and specialized REITs. We measure economies of scale using three different scale measures: total assets, real estate assets, and rental revenue. We evaluate economies of scale using a translog cost function. We find that REIT operating expenses increase less than proportionately with increases in total assets and that larger size results in reduced REIT operating costs.