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
Date Written: June 23, 2020
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: Suggested Citation