A First Look at the Impact of COVID-19 on Commercial Real Estate Prices: Asset Level Evidence

49 Pages Posted: 5 May 2020 Last revised: 25 Jun 2020

See all articles by David C. Ling

David C. Ling

University of Florida - Hough Graduate School of Business Administration

Chongyu Wang

Concordia University; University of Florida

Tingyu Zhou

Florida State University

Date Written: June 23, 2020

Abstract

This is the first paper that examines the transmission of an asset market shock to the capital markets during the COVID-19 pandemic. We construct a novel measure of the exposure of commercial real estate (CRE) portfolios to the growth in COVID-19 cases using a granular sample of firms’ individual property holdings at the end of 2019. We find that a one-standard-deviation increase in GeoCOVID on day t-1 is associated with a 0.24 to 0.93 percentage point decrease in abnormal returns over one-to-three-day windows. While daily abnormal returns react negatively to COVID-19 growth, there is substantial variation across property types. We also conduct an event study around announcements of state of emergency declarations and stay-at-home orders and find that the sensitivity of CRE returns to COVID-19 growth is reduced after announcements of these policy interventions. Our findings are not explained by national COVID-19 growth.

Keywords: COVID19, Commercial real estate, stock return, asset location

JEL Classification: I10, G11, G14, D80, R10

Suggested Citation

Ling, David C. and Wang, Chongyu and Zhou, Tingyu, A First Look at the Impact of COVID-19 on Commercial Real Estate Prices: Asset Level Evidence (June 23, 2020). Available at SSRN: https://ssrn.com/abstract=3593101 or http://dx.doi.org/10.2139/ssrn.3593101

David C. Ling

University of Florida - Hough Graduate School of Business Administration ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States
(352) 392-0153 (Phone)
(352) 392-0301 (Fax)

Chongyu Wang (Contact Author)

Concordia University ( email )

1450 Guy Street
Montreal, Quebec H3G 1A1
Canada

University of Florida ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Tingyu Zhou

Florida State University ( email )

821 Academic Way
Tallahassee, FL 32306
United States

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