Face-to-face Interactions, Tenant Resilience, and Commercial Real Estate Performance

Abstract

We study the impact of face-to-face (FTF) interactions on commercial real estate (CRE) performance. By linking tenants, properties, and CRE firms, we construct three novel FTF measures that capture tenant remote working, internal communication between coworkers, and external contact with customers. Using the COVID-19 pandemic as an exogenous shock to the FTF economy, we find that firms holding properties with tenants that are more resilient to social distancing perform better. These FTF effects weaken over the long term, however. As investors are capable of compiling valuable information at granular levels regarding how tenants operate, our findings support market efficiency and shed light on post-pandemic CRE performance.

Keywords: Commercial Real Estate, Face-to-Face Interactions, Tenant Resilience, Social Distancing, COVID-19 Pandemic

JEL Classification: G01, G11, G12, G14, R30