Face‐to‐face interactions, tenant resilience, and commercial real estate performance

Wang, Chongyu; Zhou, Tingyu

doi:10.1111/1540-6229.12412

Cited by 5 publications

(3 citation statements)

References 75 publications

(134 reference statements)

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“…Finally, our findings speak to the growing literature that examines the impact of the pandemic on real estate markets, including Ling et al (2020), Liu and Su (2021), D’Lima et al (2022), Gupta et al (2022) and Wang and Zhou (2021). Balemi et al (2021) provided a review of the latest academic papers on how the pandemic has affected the real estate markets.…”

Section: Introductionmentioning

confidence: 71%

Is this time the same? Housing market performance during SARS and COVID-19*

Lu¹,

Wang²,

Wong³

et al. 2023

IJHMA

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Purpose This paper aims to examine the housing market responses to two outbreaks of respiratory diseases in Hong Kong during the Information Era – the 2003 SARS and COVID-19 outbreaks. Design/methodology/approach The authors first investigate the aggregate housing price changes during SARS and COVID-19. Next, the authors conduct a battery of univariate analyses pertaining to the relationship between district-level housing price movements and geographic and demographic patterns during the pandemic periods. Finally, to shed light on the housing price dynamics at the micro level, the authors conduct an estate-level analysis with the data of 234 residential estates from 2003 to 2020, focusing on the impacts of SARS and COVID-19 on the idiosyncratic volatility of residential estates. Findings Overall, SARS and COVID-19 outbreaks are negatively associated with housing prices. However, unlike SARS, the impact of COVID-19 on housing prices was moderate and transient. The geographic imbalances of the epidemic-induced underperformance are observed at the district and estate levels. Finally, the estate-level analysis presented in this paper indicates that the average idiosyncratic volatility of residential estates is 1.5% higher during the SARS period but 3.7% lower during the COVID-19 period. Lower volatility during COVID-19 is likely explained by household learning from the SARS period. Practical implications Regulators and investors could resort to efficient information disclosure to attenuate idiosyncratic volatility's adverse impact on housing market returns. Originality/value To the best of the authors’ knowledge, the authors are among the first to examine housing market responses to the 2003 SARS and COVID-19 outbreaks using the Hong Kong housing market as a laboratory.

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Section: Introductionmentioning

confidence: 71%

Is this time the same? Housing market performance during SARS and COVID-19*

Lu¹,

Wang²,

Wong³

et al. 2023

IJHMA

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show abstract

“…Our test assumes that if local investors are more informed about their home markets than their nonlocal peers, reducing their holdings of REITs with a local presence should have produced higher risk‐adjusted returns if their home markets were more adversely impacted by the COVID shock. However, if the previously documented effects of COVID Severity on share ownership were primarily driven by a shift in local sentiment or salience bias, investors might have been overly risk‐averse about the prospects of REITs with a local presence and therefore reduced their holdings of local REITs more than what was justified by available information (Cao et al., 2011; Solnik & Zuo, 2017; Strong & Xu, 2003). These sentiment‐driven trades (e.g., heavy selling of local stocks) should be associated with relatively poor performance of their REIT portfolios.…”

Section: Resultsmentioning

confidence: 99%

“…On the other hand, when investors do not possess a true information advantage, geographically biased investments may result in reduced portfolio performance (Huberman, 2001; Pool et al., 2012; Ben‐David et al., 2017). The literature finds that local investors tend to be more bullish about their home markets than dNeelonistant markets (Cao et al., 2011; Solnik & Zuo, 2017; Strong & Xu, 2003). Sentiment‐driven local overweighting might sharply reverse when certain types of investors overact to local shocks.…”

Section: Introductionmentioning

confidence: 99%

How do institutional investors react to local shocks during a crisis? A test using the COVID‐19 pandemic

Ling

Wang

Zhou³

2023

Real Estate Economics

Self Cite

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We examine how institutional investors reacted to geographically dispersed local shocks during the early stages of the COVID‐19 pandemic. A sample of real estate investment trusts (REITs) enables us to link two layers of geography: the locations of the assets in which the REITs were invested and the headquarters locations of institutional investors who owned REIT shares. We find that the institutional ownership of firms with an economic interest in the investors’ home markets declined more if those markets were heavily affected by the pandemic. In addition, the ownership responses to the COVID‐19 shock were larger in those markets in which REITs had larger portfolio allocations and in markets that were home to the investors. Importantly, we find that nonpassive and short‐term investors may have overreacted to the local shocks because their REIT portfolios subsequently underperformed relative to passive and long‐term investors. Our study highlights the importance of geography in the formation of investors’ expectations during market crises.

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Governmental Restrictions and Real Estate Investor Risk Perception

Kaiser

Freybote

Schäfers

2023

J Real Estate Finan Econ

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We investigate the impact of governmental restrictions on the short-term risk perception, as proxied by the going-in cap rate, of investors in regional and neighborhood shopping centers. We use the COVID-19 pandemic as a natural experiment and proxy for the length and severity of COVID-19 restrictions with the political affiliation of state governors. Using a sample of 40 metropolitan statistical areas (MSAs) across 27 states over the period of 2018 to 2021, we find that for states with Republican governors, which proxy for shorter and fewer COVID-19 restrictions, investors in regional malls required a lower going-in cap rate in the pandemic period than for states with Democratic governors. This effect does not exist for neighborhood shopping centers, whose tenants were not as affected by COVID-19 restrictions. Robustness checks suggest that our findings can be explained with mask mandates as one type of governmental restrictions, and that COVID-19 related restrictions do not impact the long-term risk perception of retail real estate investors. We furthermore find that the political attitudes of an MSA have an impact on investor risk perception.

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Face‐to‐face interactions, tenant resilience, and commercial real estate performance

Cited by 5 publications

References 75 publications

Is this time the same? Housing market performance during SARS and COVID-19*

Is this time the same? Housing market performance during SARS and COVID-19*

How do institutional investors react to local shocks during a crisis? A test using the COVID‐19 pandemic

Governmental Restrictions and Real Estate Investor Risk Perception

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