IMF Working Papers

Commercial Real Estate in Crisis: Evidence from Transaction-Level Data

By Adrian Alter, Elizabeth M. Mahoney, Cristian Badarinza

January 27, 2023

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Adrian Alter, Elizabeth M. Mahoney, and Cristian Badarinza. Commercial Real Estate in Crisis: Evidence from Transaction-Level Data, (USA: International Monetary Fund, 2023) accessed November 8, 2024

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Summary

During the past two decades, the commercial real estate (CRE) market has been impacted by major disruptions, including the global financial crisis and the Covid-19 pandemic. Using granular data from the U.S., we document how these crises have unfolded and elaborate on the role of heterogeneity and underlying shocks. Both a set of reduced-form approaches and a structural framework suggest a prominent role for demand-side local factors in the short run, along with significant shifts in preferences during crisis episodes. However, valuations become more closely linked to macro-financial factors over the long term. A one-standard deviation tightening in financial conditions is associated with a drop of about 3% in CRE prices in the following quarter, with a stronger impact on the retail sector and milder effects in states where household indebtedness is lower.

Keywords: Big Data, Financial Conditions, Liquidity, Non-residential Real Estate

Publication Details

  • Pages:

    46

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2023/015

  • Stock No:

    WPIEA2023015

  • ISBN:

    9798400231070

  • ISSN:

    1018-5941