Work from Home and Commercial Real Estate: Evidence from Stock Markets

33 Pages Posted: 15 Feb 2022 Last revised: 3 Oct 2022

See all articles by Stanimira Milcheva

Stanimira Milcheva

University College London

Lingshan Xie

University College London

Date Written: September 30, 2022

Abstract

We explore investor expectations about the effects of work from home (WFH) on real estate companies during the beginning of the Covid-19 pandemic. We assess how differences in WFH exposure of listed real estate investment trusts (REITs) in European economies affect their abnormal returns. We associate WFH exposure with the property’s underlying major tenants and their announcements to work from home, i.e. tenant WFH intensity. We also use alternative metrics using REIT’s exposure to the office sector and the proportion of properties located in central business districts (CBDs). We show that REITs with higher WFH exposure have significantly negative abnormal returns independently of their domicile, sector specialization, Covid-19 exposure, or CBD exposure. In addition, using an event study of WFH announcements by tenants, we find significantly negative cumulative abnormal returns, in line with above findings. We demonstrate that equity investors incorporate news related to WFH when pricing real estate companies in the early stages of the Covid-19 pandemic.

Keywords: COVID-19, work from home, real estate investment trusts, stock return, tenant

JEL Classification: G14, R30, D80

Suggested Citation

Milcheva, Stanimira and Xie, Lingshan, Work from Home and Commercial Real Estate: Evidence from Stock Markets (September 30, 2022). Available at SSRN: https://ssrn.com/abstract=4024265 or http://dx.doi.org/10.2139/ssrn.4024265

Stanimira Milcheva (Contact Author)

University College London ( email )

1-19 Torrington Place
Bartlett School of Sustainable Construction
London, London WC1E 7HB
United Kingdom

HOME PAGE: http://www.stanimilcheva.com

Lingshan Xie

University College London ( email )

1-19 Torrington Place
Department of Construction and Project Management
London, London WC1E 7HB
United Kingdom

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