Recent Drops in Market Liquidity May Foreshadow Major Drops in US Commercial Real Estate Markets

14 Pages Posted: 20 May 2020 Last revised: 11 Nov 2020

See all articles by Dorinth van Dijk

Dorinth van Dijk

De Nederlandsche Bank; Massachusetts Institute of Technology (MIT)

Anne Kinsella Thompson

Massachusetts Institute of Technology (MIT) - Center for Real Estate

David Geltner

Massachusetts Institute of Technology (MIT); MIT Center for Real Estate

Date Written: May 18, 2020

Abstract

The study quantifies liquidity impacts measured by the Demand-Supply Gap in terms of asset pricing implications for US private commercial real estate markets of the COVID-19 crisis. So far (using data up to April 2020), New York is hardest hit among the eight metros examined, with a predicted average price drop between 19 and 30 percent, reflecting a drop in liquidity already three-quarters of the total liquidity drop that occurred in the entire Global Financial Crisis of 2008-09. Among property sectors nationwide, retail is hit hardest with 14 to 19 percent predicted price drop and liquidity down already almost 60 percent as much as it dropped in the entire GFC.

Keywords: Liquidity, Commercial Real Estate, COVID-19, COVID, Coronavirus

JEL Classification: R30, G12

Suggested Citation

van Dijk, Dorinth and Kinsella Thompson, Anne and Geltner, David, Recent Drops in Market Liquidity May Foreshadow Major Drops in US Commercial Real Estate Markets (May 18, 2020). MIT Center for Real Estate Research Paper No. 2, Available at SSRN: https://ssrn.com/abstract=3604606 or http://dx.doi.org/10.2139/ssrn.3604606

Dorinth Van Dijk (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Anne Kinsella Thompson

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

United States

David Geltner

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

MIT Center for Real Estate ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

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