TY - JOUR
T1 - REIT Economies of Scale
T2 - Fact or Fiction?
AU - Ambrose, Brent W.
AU - Ehrlich, Steven R.
AU - Hughes, William T.
AU - Wachter, Susan M.
N1 - Funding Information:
We thank John Glascock, Peter Linneman, and the seminar participants at the University of Georgia and Cornell University for their helpful comments and suggestions. An earlier version of this article was presented at the 1998 American Real Estate Society meeting. This research is supported by the Real Estate Research Institute and the Samuel Zell and Robert Lurie Real Estate Center Research Sponsors Program at the University of Pennsylvania.
PY - 2000
Y1 - 2000
N2 - The real estate industry has recently witnessed significant and pervasive consolidation with further growth and consolidation generally viewed as inevitable. For example, between 1990 and 1997, growth in average net real estate investments by large REITs outpaced growth in average net real estate investments by small REITs by 13 percent. However, no systematic study of the benefits of this consolidation exists. This research studies whether or not there are gains to consolidation due to economies of scale from size, brand imaging, and informational gains from geographic specialization. Our sample consists of 41 multifamily equity REITs, for whom financial and property level data are available in the SNL REIT Database. Using this data, we construct shadow portfolios that mimic each REIT's exposure to changes in local market conditions. Our results show no size economies, that branding in real estate is allusive, and that geographic specialization, in agreement with Gyourko and Nelling (1996), has no significant benefit.
AB - The real estate industry has recently witnessed significant and pervasive consolidation with further growth and consolidation generally viewed as inevitable. For example, between 1990 and 1997, growth in average net real estate investments by large REITs outpaced growth in average net real estate investments by small REITs by 13 percent. However, no systematic study of the benefits of this consolidation exists. This research studies whether or not there are gains to consolidation due to economies of scale from size, brand imaging, and informational gains from geographic specialization. Our sample consists of 41 multifamily equity REITs, for whom financial and property level data are available in the SNL REIT Database. Using this data, we construct shadow portfolios that mimic each REIT's exposure to changes in local market conditions. Our results show no size economies, that branding in real estate is allusive, and that geographic specialization, in agreement with Gyourko and Nelling (1996), has no significant benefit.
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U2 - 10.1023/A:1007881422383
DO - 10.1023/A:1007881422383
M3 - Article
AN - SCOPUS:0041526041
SN - 0895-5638
VL - 20
SP - 211
EP - 224
JO - Journal of Real Estate Finance and Economics
JF - Journal of Real Estate Finance and Economics
IS - 2
ER -