Commercial Real Estate in a Nation of Lockdowns
55 Pages Posted: 2 Apr 2024 Last revised: 13 Nov 2024
Date Written: November 01, 2024
Abstract
When the COVID-19 virus began to spread across the United States during early 2020, in an effort to contain its effects, the federal government delegated certain decisions regarding how to restrict citizen mobility and economic activity to state and local government officials. This delegation created a staggered environment of restrictions throughout the nation, which ultimately had varying consequences for local markets. We exploit the variation in government-implemented COVID-19 restrictions and citizen mobility trends at work and retail locations to test how commercial real estate properties performed across commercial real estate markets and property types. Using quarterly data on a large sample of commercial properties, we examine how restrictions and mobility impacted valuations and income performance, particularly for the four major property types – apartments, industrial, office, and retail. In general, we find that government restrictions had negative effects on returns at apartment, retail, and office properties, with retail suffering more than apartments, and office suffering more than retail. In contrast, government restrictions had positive effects on performance at industrial properties.
Keywords: commercial real estate, COVID-19, NCREIF, pandemic
JEL Classification: G18, G23, R3
Suggested Citation: Suggested Citation