Faculty Scholarship 1994 - Present

How Efficient the REITs Are Upon Entry?

Lately, important regulatory reforms have been launched to promote the real estate development, and to enhance the performance of the REITs through heightened competition. By the rapid increase in the new IPOs, the number of de novo REITs more than quadrupled in the past two decades, making them the major source of funding for the real estate industry. Yet, no study has investigated the post-entry performance of the de novo REITs to see whether these institutions were able to compete effectively with established ones in terms of efficiency and productivity in the new competitive environment. By using Malmquist index approach, we investigate the initial changes in the productivity and efficiency of the de novo REITs vis a vis established ones. Our results suggest that de novo REITs tend to outperform established REITs in all aspects of technical efficiency.