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Article

Measuring efficiency of the Australian real estate investment trust based on data envelopment analysis approach

Jun 14, 2017

DOI:

Published in: Journal of Applied Economic Sciences

/ Ammar Jreisat

The paper examined the technical, pure technical and scale efficiency in Australian Real Estate Investment Trust (AREITs) to determine best practice for operations to enhance the performance of REITs. Ten Australian REITs from 2004 to 2011 are examined in terms of input and output variables in the efficiency measurement using the non-parametric approach to benchmark and determine which of the REITs are efficient. Input orientation Variable Return to Scale Data Envelopment Analysis (VRS-DEA model) is used for the entire sample using the DEAP version 2.1. Three inputs are utilized which are operating expenses, administrative expenses, and interest expenses. Meanwhile, outputs used are total assets, enterprise value. As results, of all 10 Australian REITs involved in this study, it shows that the average efficiency score 72%, which means the REITs could minimize the cost to decrease inefficiency by 28%. The result reveal that all the Australian REIT shown high efficiency score in the year from 2004 till 2007 and then the efficiency score decline dramatically until year 2011 which appeared clearly due to the global financial crises. These preliminary findings highlight the pre and post era of the Global Financial Crisis (GFC), which will examine the effects of GFC on the efficiency for Australian REITs. © 2017, ASERS Publishing House. All rights reserved.

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