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- Title
Benchmarking the Financial Performance of Office Real Estate Investment Trusts in the COVID-19 Era.
- Authors
Malhotra, Rashmi; Malhotra, D. K.
- Abstract
Motivation: This paper carries relevance to the real estate investment community, encompassing investors and REIT managers. It offers valuable insights into the performance of office real estate investment trusts (REITs) during the tumultuous period of the COVID-19 pandemic, shedding light on their relative efficiency. Premise: This study analyzes the operational efficiency of 20 office REITs from 2018 to 2022, with a particular focus on their adaptability in this challenging landscape brought by the COVID-19 pandemic and resultant surge in vacancy rates and a reduction in rental income. Approach: This research employs data envelopment analysis (DEA). The application of DEA enables a comprehensive assessment of these REITs' efficiency across a 5-year timeframe. Results: Findings from this study indicate that the average efficiency score of office REITs declined from 89 percent in 2018 to 87 percent in 2022. Moreover, the number of REITs with a perfect 100 percent efficiency score decreased from 9 to 8 during this period. Through peer analysis, best practices, and potential avenues for efficiency improvement within these REITs were identified. Conclusion: This research underscores the diminished efficiency in the office real estate market following the onset of the COVID-19 pandemic. These findings empower investors to discern the varying degrees of efficiency among office REITs and make well-informed investment choices. Additionally, REIT managers can employ the efficiency frontier and peer analysis to benchmark their performance and uncover areas for enhancement. Consistency: This manuscript provides empirically grounded insights into the real estate investment sector, renowned for its inherent risks and uncertainties, thus contributing to a deeper understanding of how businesses adapt and navigate complex economic conditions.
- Subjects
REAL estate investment trusts; COVID-19 pandemic; FINANCIAL performance; REAL estate investment; REAL estate sales; BENCHMARKING (Management)
- Publication
Review of Business, 2024, Vol 44, Issue 1, p35
- ISSN
0034-6454
- Publication type
Article