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© 2023 International Monetary Fund
WP/23/15
IMF Working Paper
Middle East and Central Asia Department
Commercial Real Estate in Crisis: Evidence from Transaction-Level Data
Prepared by Adrian Alter, Cristian Badarinza, Elizabeth Mahoney*
Authorized for distribution by Felix Fischer
January 2023
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: During the past two decades, the commercial real estate (CRE) market has been impacted by major disruptions, including the global financial crisis and the Covid-19 pandemic. Using granular data from the U.S., we document how these crises have unfolded and elaborate on the role of heterogeneity and underlying shocks. Both a set of reduced-form approaches and a structural framework suggest a prominent role for demand-side local factors in the short run, along with significant shifts in preferences during crisis episodes. However, valuations become more closely linked to macro-financial factors over the long term. A one-standard deviation tightening in financial conditions is associated with a drop of about 3\% in CRE prices in the following quarter, with a stronger impact on the retail sector and milder effects in states where household indebtedness is lower.
| JEL Classification Numbers: | G12; E32; R33 |
| Keywords: | Non-residential Real Estate; Financial Conditions; Liquidity; Big Data |
| Author’s E-Mail Address: | aalter@imf.org; cristian.badarinza@nus.edu.sg; elizabeth.mahoney@census.gov |
| JEL Classification Numbers: | G12; E32; R33 |
| Keywords: | Non-residential Real Estate; Financial Conditions; Liquidity; Big Data |
| Author’s E-Mail Address: | aalter@imf.org; cristian.badarinza@nus.edu.sg; elizabeth.mahoney@census.gov |
Title page
WORKING PAPERS
Commercial Real Estate in Crisis
Evidence from Transaction-Level Data
Prepared by Adrian Alter, Cristian Badarinza, Elizabeth Mahoney1
Transaction-level data were provided by Zillow through the Zillow Transaction and Assessment Dataset (ZTRAX). More information on accessing the data can be found at http://www.zillow.com/ztrax. The results and opinions are those of the authors and do not reflect the position of Zillow Group, Inc., SafeGraph, or Real Capital Analytics. Business listings and footfall data were provided by SafeGraph.
We are grateful to Prasad Ananthakrishnan, Mariarosaria Comunale, Guenter Franke, Chris Geiregat, Neesha Harnam, Prakash Loungani, Camelia Minoiu, Nick Moschovakis, Tahsin Saadi Sedik, Alberto Sanchez, Radu Tunaru, Carlos van Hombeeck, and IMF’s seminar participants for useful comments and suggestions. The results and opinions are those of the authors and do not reflect the position of Zillow Group, Inc., SafeGraph, Real Capital Analytics, the IMF, its Executive Board, or IMF management.