Economies-of-Scale for Real Estate Investment Trusts

Abstract. Using the translog cost function to estimate economies-of-scale for a sample of Real Estate Investment Trusts for the years 199-1994, we find significant evidence that economies-of-scale exist for REITs for all years examined. The results show that measurement of scale economies is sensitive to the model used for the measurement. Individual characteristics of the REIT, such as type of management and degree of leverage, affect the magnitude of the scale economy. Additional variables accounting for propertytype diversification and geographic influences have little additional impact on the measured scale economies. Finally, the measured economies-of-scale for REITs vary considerably over time.