TY - JOUR
T1 - Real estate and economies of scale
T2 - The case of REITs
AU - Ambrose, Brent W.
AU - Highfield, Michael J.
AU - Linneman, Peter D.
PY - 2005/6
Y1 - 2005/6
N2 - Building on past research in the economies-of-scale debate, we test for scale economies in real estate investment trusts (REITs) by examining growth prospects, revenue and expense measures, profitability ratios, systematic risk and capital costs. Overall, we find that large REITs are increasing growth prospects while succeeding at lowering costs, leading to a direct relationship between firm profitability and firm size. Additionally, we find an inverse relationship between equity betas and firm size, and for all cost of capital measures we find significant scale economies. Further evidence from the stochastic frontier analysis suggests efficiency opportunities appear possible through continued growth and consolidation in REITs.
AB - Building on past research in the economies-of-scale debate, we test for scale economies in real estate investment trusts (REITs) by examining growth prospects, revenue and expense measures, profitability ratios, systematic risk and capital costs. Overall, we find that large REITs are increasing growth prospects while succeeding at lowering costs, leading to a direct relationship between firm profitability and firm size. Additionally, we find an inverse relationship between equity betas and firm size, and for all cost of capital measures we find significant scale economies. Further evidence from the stochastic frontier analysis suggests efficiency opportunities appear possible through continued growth and consolidation in REITs.
UR - http://www.scopus.com/inward/record.url?scp=20744440146&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=20744440146&partnerID=8YFLogxK
U2 - 10.1111/j.1540-6229.2005.00121.x
DO - 10.1111/j.1540-6229.2005.00121.x
M3 - Article
AN - SCOPUS:20744440146
SN - 1080-8620
VL - 33
SP - 323
EP - 350
JO - Real Estate Economics
JF - Real Estate Economics
IS - 2
ER -