CRE Redevelopment Options and the Use of Mortgage Financing

David Glancy, Robert Kurtzman and Lara Loewenstein

No 2024-046, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: A significant share of commercial real estate (CRE) investment properties---about half by our estimates---are purchased without a mortgage. Using comprehensive microdata on transactions in the U.S. CRE market, we analyze which types of properties are purchased without a mortgage, highlighting the important role of renovation or redevelopment options. We show that mortgage-financed properties are less likely to be subsequently redeveloped, and that owners anticipate these redevelopment frictions and avoid mortgage financing for properties with greater redevelopment options. These effects were even stronger during the COVID-19 pandemic, when uncertainty increased redevelopment option values.

Keywords: Commercial real estate; Cash buyers; Redevelopment (search for similar items in EconPapers)
JEL-codes: G21 G22 G23 R33 (search for similar items in EconPapers)
Pages: 51 p.
Date: 2024-06-21
New Economics Papers: this item is included in nep-inv and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.federalreserve.gov/econres/feds/files/2024046pap.pdf (application/pdf)

Related works:
Working Paper: CRE Redevelopment Options and the Use of Mortgage Financing (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-46

DOI: 10.17016/FEDS.2024.046

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