Productivity growth of the Australian real estate investment trusts


This study aims to evaluate the productivity change of the Australian Real Estate Investment Trust (REITs) by using a Balance panel data set which cover 10 AREITs operating in the Australian market from 2004 to 2011. The study use a non-parametric approach Data Envelopment Analysis based analysis to investigate the productivity change. Input-oriented Malmquist indices of productivity change are estimated to measure total factor productivity (TFP) change. The TFP changes are decomposed into the product of technological change and technical efficiency change (catch-up). Three inputs are utilized which are operating expenses, administrative expenses, and interest expenses. Meanwhile, outputs used are total assets, enterprise value. Variable Return to Scale Data Envelopment Analysis (VRS-DEA model) is used for the entire sample using the (Coelli, 1996) DEAP version 2.1. The results indicate that the average productivity declined and technology regressed during this decade. It appears that the typical REIT has failed to improve technically, but exerted substantial effort to catch up with the best practice ones relying mainly on aggressive growth strategies. Results indicate that AREITs experienced a 2.4% TFP regress, a 2.6% technological regress, a 0.1% efficiency progress, a 0.5% pure efficiency fall and a 0.6% scale efficiency increase on average between 2004–2011.

DOI Code: 10.1285/i20705948v11n1p58

Keywords: Data Envelopment Analysis, Malmquist Index, Productivity, TFPC, Real Estate, AREITs.


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