IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v14y2022i19p12851-d936765.html
   My bibliography  Save this article

Commercial Real Estate Market at a Crossroads: The Impact of COVID-19 and the Implications to Future Cities

Author

Listed:
  • Yijia Wen

    (Department of Urban and Regional Planning, Florida State University, Tallahassee, FL 32306, USA)

  • Li Fang

    (Department of Urban and Regional Planning, Florida State University, Tallahassee, FL 32306, USA)

  • Qing Li

    (Department of Finance, Insurance and Real Estate, University of Florida, Gainesville, FL 32611, USA)

Abstract

This paper aims to examine the responses of commercial real estate markets to COVID-19 and the implications for post-pandemic cities. Using data of Florida’s metropolitan areas in a fixed effect regression model, we find that sales volumes of retail properties decline instantly under the shock of COVID-19 but are followed by a strong recovery after one quarter. Meanwhile, COVID-19 depresses the growth rate of rent for office property, but the impact is short-term, and the office rental market bounces back to about 70 percent one quarter later. In comparison, industrial properties witness a rise in the growth rate of sales and rent price. Results indicate that urban planners may consider adjusting the amount of lands allocated to different usages to meet the evolving demands of urban space in the post-pandemic era.

Suggested Citation

  • Yijia Wen & Li Fang & Qing Li, 2022. "Commercial Real Estate Market at a Crossroads: The Impact of COVID-19 and the Implications to Future Cities," Sustainability, MDPI, vol. 14(19), pages 1-16, October.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:19:p:12851-:d:936765
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/14/19/12851/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/14/19/12851/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
    2. Barrero, Jose Maria & Bloom, Nick & Davis, Steven J., 2020. "Why Working From Home Will Stick," SocArXiv wfdbe, Center for Open Science.
    3. Jason Hackworth, 2001. "Inner-City Real Estate Investment, Gentrification, and Economic Recession in New York City," Environment and Planning A, , vol. 33(5), pages 863-880, May.
    4. Asger Lau Andersen & Emil Toft Hansen & Niels Johannesen & Adam Sheridan, 2022. "Consumer responses to the COVID‐19 crisis: evidence from bank account transaction data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(4), pages 905-929, October.
    5. Rosenthal, Stuart S. & Strange, William C. & Urrego, Joaquin A., 2022. "JUE insight: Are city centers losing their appeal? Commercial real estate, urban spatial structure, and COVID-19," Journal of Urban Economics, Elsevier, vol. 127(C).
    6. Lynn E. Browne & Karl E. Case, 1992. "How the commercial real estate boom undid the banks," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 36, pages 57-113.
    7. Joost R. Santos & Mark J. Orsi & Erik J. Bond, 2009. "Pandemic Recovery Analysis Using the Dynamic Inoperability Input‐Output Model," Risk Analysis, John Wiley & Sons, vol. 29(12), pages 1743-1758, December.
    8. Franz Fuerst & Patrick McAllister, 2011. "Green Noise or Green Value? Measuring the Effects of Environmental Certification on Office Values," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(1), pages 45-69, March.
    9. Anqi Zhang & Weifeng Li & Jiayu Wu & Jian Lin & Jianqun Chu & Chang Xia, 2021. "How can the urban landscape affect urban vitality at the street block level? A case study of 15 metropolises in China," Environment and Planning B, , vol. 48(5), pages 1245-1262, June.
    10. Donihue Michael & Avramenko Andriy, 2007. "Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-33, August.
    11. Zac J. Taylor, 2020. "The real estate risk fix: Residential insurance-linked securitization in the Florida metropolis," Environment and Planning A, , vol. 52(6), pages 1131-1149, September.
    12. Barrios, John M. & Hochberg, Yael V., 2021. "Risk perceptions and politics: Evidence from the COVID-19 pandemic," Journal of Financial Economics, Elsevier, vol. 142(2), pages 862-879.
    13. David Geltner, 2015. "Real Estate Price Indices and Price Dynamics: An Overview from an Investments Perspective," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 615-633, December.
    14. Wong, Grace, 2008. "Has SARS infected the property market Evidence from Hong Kong," Journal of Urban Economics, Elsevier, vol. 63(1), pages 74-95, January.
    15. Yilmazer, Tansel & Babiarz, Patryk & Liu, Fen, 2015. "The impact of diminished housing wealth on health in the United States: Evidence from the Great Recession," Social Science & Medicine, Elsevier, vol. 130(C), pages 234-241.
    16. Aizenman, Joshua & Jinjarak, Yothin, 2014. "Real estate valuation, current account and credit growth patterns, before and after the 2008–9 crisis," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 249-270.
    17. Jeffrey P. Cohen & Felix L. Friedt & Jackson P. Lautier, 2022. "The impact of the Coronavirus pandemic on New York City real estate: First evidence," Journal of Regional Science, Wiley Blackwell, vol. 62(3), pages 858-888, June.
    18. Arpit Gupta & Vrinda Mittal & Stijn Van Nieuwerburgh, 2022. "Work From Home and the Office Real Estate Apocalypse," NBER Working Papers 30526, National Bureau of Economic Research, Inc.
    19. Ron Martin, 2011. "The local geographies of the financial crisis: from the housing bubble to economic recession and beyond," Journal of Economic Geography, Oxford University Press, vol. 11(4), pages 587-618, July.
    20. Tomasz Napierała & Katarzyna Leśniewska-Napierała & Rafał Burski, 2020. "Impact of Geographic Distribution of COVID-19 Cases on Hotels’ Performances: Case of Polish Cities," Sustainability, MDPI, vol. 12(11), pages 1-18, June.
    21. Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Liu, Guangqiang, 2021. "COVID-19 lockdowns, stimulus packages, travel bans, and stock returns," Finance Research Letters, Elsevier, vol. 38(C).
    22. Libo Sun & Sheridan D. Titman & Garry J. Twite, 2015. "REIT and Commercial Real Estate Returns: A Postmortem of the Financial Crisis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(1), pages 8-36, March.
    23. Nafeesa Yunus, 2018. "Transmission of shocks across global real estate and equity markets: An examination of the 2007–2008 housing crisis," Applied Economics, Taylor & Francis Journals, vol. 50(36), pages 3899-3922, August.
    24. Francke, Marc & Korevaar, Matthijs, 2021. "Housing markets in a pandemic: Evidence from historical outbreaks," Journal of Urban Economics, Elsevier, vol. 123(C).
    25. Stanley McGreal & Alastair Adair & Louise Brown & James R. Webb, 2009. "Pricing and Time on the Market for Residential Properties in a Major U.K. City," Journal of Real Estate Research, American Real Estate Society, vol. 31(2), pages 209-234.
    26. Attila Ambrus & Erica Field & Robert Gonzalez, 2020. "Loss in the Time of Cholera: Long-Run Impact of a Disease Epidemic on the Urban Landscape," American Economic Review, American Economic Association, vol. 110(2), pages 475-525, February.
    27. Hanwool Jang & Yena Song & Sungbin Sohn & Kwangwon Ahn, 2018. "Real Estate Soars and Financial Crises: Recent Stories," Sustainability, MDPI, vol. 10(12), pages 1-12, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gaige Hunter Kerr & Michelle Meyer & Daniel L. Goldberg & Joshua Miller & Susan C. Anenberg, 2024. "Air pollution impacts from warehousing in the United States uncovered with satellite data," Nature Communications, Nature, vol. 15(1), pages 1-9, December.
    2. Abdul Rahman, Mohd Shahril & Awang, Mariah & Jagun, Zainab Toyin, 2024. "Polycrisis: Factors, impacts, and responses in the housing market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 202(C).
    3. Merten, Laura & Kuhnimhof, Tobias, 2023. "Impacts of parking and accessibility on retail-oriented city centres," Journal of Transport Geography, Elsevier, vol. 113(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sandro Heiniger & Winfried Koeniger & Michael Lechner, 2022. "The Heterogeneous Response of Real Estate Asset Prices to a Global Shock," Swiss Finance Institute Research Paper Series 22-86, Swiss Finance Institute.
    2. Gilles Duranton & Jessie Handbury, 2023. "COVID and Cities, Thus Far," Economic Policy Review, Federal Reserve Bank of New York, vol. 29(2), pages 6-52, October.
    3. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    4. Bergeaud, Antonin & Eyméoud, Jean-Benoît & Garcia, Thomas & Henricot, Dorian, 2023. "Working from home and corporate real estate," Regional Science and Urban Economics, Elsevier, vol. 99(C).
    5. Stephen Malpezzi, 2023. "Housing affordability and responses during times of stress: A preliminary look during the COVID‐19 pandemic," Contemporary Economic Policy, Western Economic Association International, vol. 41(1), pages 9-40, January.
    6. Koetter, Michael & Noth, Felix, 2022. "European real estate markets during the pandemic: Is COVID-19 also a case for house price concerns?," IWH Policy Notes 3/2022, Halle Institute for Economic Research (IWH).
    7. Wang, Bingbing, 2022. "Housing market volatility under COVID-19: Diverging response of demand in luxury and low-end housing markets," Land Use Policy, Elsevier, vol. 119(C).
    8. Liu, Yanan & Tang, Yugang, 2021. "Epidemic shocks and housing price responses: Evidence from China's urban residential communities," Regional Science and Urban Economics, Elsevier, vol. 89(C).
    9. Bruno P. Carvalho & Susana Peralta & João Pereira dos Santos, 2022. "Regional and sectorial impacts of the Covid‐19 crisis: Evidence from electronic payments," Journal of Regional Science, Wiley Blackwell, vol. 62(3), pages 757-798, June.
    10. Shian Zeng & Chengdong Yi, 2022. "Impact of the COVID-19 pandemic on the housing market at the epicenter of the outbreak in China," SN Business & Economics, Springer, vol. 2(6), pages 1-20, June.
    11. Nadia Balemi & Roland Füss & Alois Weigand, 2021. "COVID-19’s impact on real estate markets: review and outlook," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 495-513, December.
    12. Stijn Van Nieuwerburgh, 2023. "The remote work revolution: Impact on real estate values and the urban environment: 2023 AREUEA Presidential Address," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 7-48, January.
    13. Hakan Yilmazkuday, 2023. "COVID-19 and housing prices: evidence from U.S. county-level data," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 43(2), pages 241-263, August.
    14. Anthony Goerzen & Christian Geisler Asmussen & Bo Bernhard Nielsen, 2024. "Global cities, the liability of foreignness, and theory on place and space in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(1), pages 10-27, February.
    15. Ka Shing Cheung & Chung Yim Yiu & Chuyi Xiong, 2021. "Housing Market in the Time of Pandemic: A Price Gradient Analysis from the COVID-19 Epicentre in China," JRFM, MDPI, vol. 14(3), pages 1-17, March.
    16. Lee, Kangoh, 2023. "Working from home as an economic and social change: A review," Labour Economics, Elsevier, vol. 85(C).
    17. Bertrand Achou & Hippolyte d'Albis & Eleni Iliopulos, 2021. "Real Estate and Rental Markets during Covid Times," Documents de recherche 21-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    18. Tanaka, Kiyoyasu, 2023. "What hinders digital communication? Evidence from foreign firms in Japan," Japan and the World Economy, Elsevier, vol. 66(C).
    19. Walter D'Lima & Luis Arturo Lopez & Archana Pradhan, 2022. "COVID‐19 and housing market effects: Evidence from U.S. shutdown orders," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 303-339, June.
    20. Ambrocio, Gene & Hasan, Iftekhar, 2022. "Belief polarization and Covid-19," Bank of Finland Research Discussion Papers 10/2022, Bank of Finland.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:14:y:2022:i:19:p:12851-:d:936765. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.