Performance of Shopping Centres - Do Management's Beliefs and Perceptions Matter?*

Transcription

1 HKIS Property & Facility Management Division Conference 3 December 2011 Performance of Shopping Centres - Do Management's Beliefs and Perceptions Matter?* Professor K W Chau Department of Real Estate and Construction The University of Hong Kong hrrbckw@hku.hk This presentation is based on Dr John W T Hui s PhD thesis supervised by the presenter K W Chau

2 Determinants of Shopping Centres Hardware: Performance The characteristics of a shopping centre (e.g. location, design etc) Not related to shopping centre management Software: Management performance: management efficiency of a shopping centre.

3 Management Efficiency Performance management efficiency Efficiency comparison of ratio of output (outcome) to input (resources utilized to achieve the outcome) High efficiency means more output generated with less input

4 Hardware Location and physical characteristics Rental income People Software

5 Shopping Centre Management Efficiency Output Rental Income controlled for the effects of hardware factors (theoretical income of shopping centres with the same location and physical characteristics) Input Human Resources utilized to generate the Output Comparison of output to input is a measure of Shopping Centre Management Efficiency or Management Efficiency in short.

6 Objective of the study Investigate the impact of beliefs and perceptions of management on the Shopping Centre Management Efficiency holding other factors constant.

7 Location and physical characteristics Factors being held constant Rental income due to hardware characteristics People input output Rental income due to software characteristics Management Efficiency Management characteristics Management briefs and perceptions

8 Management characteristics Management characteristics cannot be easily observed directly. However the management make decisions based on what they believe to be true and how they perceive the real world (briefs and perceptions) Information on management briefs and perception can be collected by survey.

9 Three categories of management functions A. Strategic B. Marketing and leasing C. Operational

10 Summary of expected impacts A. STRATEGIC A1 A2 A3 Management briefs and perceptions Financial return > Image Building Centralizes > Decentralized Tenants > Shoppers Impact on Management Efficiency Nil -ve ">" Means "is more important than"

11 Summary of expected impacts B. LEASING & MARKETING Management briefs and perceptions B1 Visitor Flow > any other factors B2 Professional qualifications > Experience in staff selection B3 Planned Tenants Mix > Free Market Forces Impact on Management Efficiency ">" Means "is more important than"

12 Summary of expected impacts C. OPERATIONAL Management briefs and perceptions C1 Budget Based > Create Value C2 Professional qualifications > Experience in staff selection C3 Physical Property > Shoppers Impact on Management Efficiency ">" Means "is more important than"

13 Method of Analysis Step 1- Measurement of output Estimate the hedonic rental function on location and physical characteristics, i.e. RVM = f(location factors and physical characteristics)+ r RVM is rateable value per m 2 of saleable floor area which is used as a proxy for rent, the residual r is the rental income controlled for the effects of the physical characteristics of the shopping centres i.e. rental income of the shopping centres with the same location and physical characteristics Shopping centres along the MTR stations are used to minimize the number of independent variables need to be included in the hedonic model

14 Measurement of Management Efficiency Step 2 use Data Envelopment Analysis (DEA) model to obtain the management efficiency of each shopping centre Input = Quantity of a mix of different types of managerial and professional staff utilized to run each shopping centres Output = Residuals from Step 1 Management Efficiency (ME) = Technical Efficiency Scores assuming constant return to scale obtained from the DEA model

15 Step 3 Regress ME from step 2 on the Brief and Perception variables and other control variables that might affect ME, i.e. ME = f(briefs and Perceptions, control factors) + The coefficients of the regression tells us whether the expected impact of management briefs and perceptions on management efficiency are correct.

16 Data Data sample Shopping Centres along the MTR route RVM proxied by rateable value per saleable floor area Physical characteristics building plans, maps and MTR route maps, land registry records and site inspection. Human resources input Survey of top and middle management Management characteristics Survey of top and middle management

17 Step 1 Regression results Dependent Variable: ln(rvm) Number of observations: 106 Coefficient t-statistic Prob. C (constant) < 0.1% AGE (age of shopping centre) CP (carpark) MSD (number of stations from the nearest shopping areas) < 0.1% NRES (use on upper floors) TALL (tall multi-level shopping centre) IFA (Internal Floor area) 3.38E Adjusted R-squared F-statistic

18 Step 2 results (DEA analysis) Efficiency Scores

19 Step 3 regression results Dependent Variable: ln(me) Number of observations: 106 Coefficient t-statistic Prob. C <0.1% LOCN (A1) CNMG (A2) TGCM (A3) ** VFLW (B1) *** <0.1% HRLM (B2) * TNMX (B3) MOBJ (C1) HRPM (C2) ** SBJT (C3) *** <0.1% AGE (controls) CP (controls) ** IFA (controls) *** <0.1% MSD (controls) NRES (controls) Adj R F-statistic

20 Summary of findings A. STRATEGIC Management briefs and perceptions Expected Impact on Management Efficiency Results A1 Financial return > Image Building (nil) A2 Centralizes > Decentralized A3 Tenants > Shoppers Nil -ve

21 Summary of expected impacts B. LEASING & MARKETING Management briefs and perceptions B1 Visitor Flow > any other factors Expected Impact on Management Efficiency Results (-ve) B2 Professional qualifications > Experience in staff selection (-ve) B3 Planned Tenants Mix > Free Market Forces (Nil)

22 Summary of expected impacts C. OPERATIONAL Management briefs and perceptions C1 Budget Based > Create Value C2 Professional qualifications > Experience in staff selection C3 Physical Property > Shoppers Expected Impact on Management Efficiency Results (Nil) (-ve)

23 Conclusion 1. Management briefs and perceptions do affect the efficiency of shopping centre management 2. Focusing too much on visitor flow may lead to lower management efficiency 3. Management should focus more on the needs of the shoppers rather than those of the tenants at the marketing and operational levels

24 Thank You