Nº 21-08: Commercial Real Estate Prices and Covid-19

The article analyzes the effects of the Covid-19 pandemic on commercial real estate prices. We start by highlighting caveats to bear in mind when referring to direct real estate indices. We then analyze the behavior of commercial real estate prices during the pandemic, emphasizing differences across property types. For that purpose, we use data for both direct and listed real estate. We further discuss changes in the main factors affecting commercial real estate pricing. The article then turns to discussing the likely trajectory of commercial real estate prices in the future. We report that retail and hospitality properties and to a lesser extent office buildings have been affected the most by Covid-19. The other sectors, in particular the residential and industrial sectors, have shown more resilience. We maintain that the future trajectory of real estate prices will vary across sectors and that the type and location of assets will become increasingly important in their valuation.