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

Author

Listed:
  • Mr. Adrian Alter
  • Elizabeth M. Mahoney
  • Cristian Badarinza

Abstract

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.

Suggested Citation

  • Mr. Adrian Alter & Elizabeth M. Mahoney & Cristian Badarinza, 2023. "Commercial Real Estate in Crisis: Evidence from Transaction-Level Data," IMF Working Papers 2023/015, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2023/015
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=528653
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    Cited by:

    1. Bednarek, Peter & Franke, Günter, 2024. "Dynamics of probabilities of default," Discussion Papers 32/2024, Deutsche Bundesbank.

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