Source: Kellogg Insight —
Real estate markets tend to be cyclical, moving through distinct phases. Under ordinary times, this would give economists some sense of where the sector is headed next.
But three years into a global pandemic that radically changed how—and where—Americans work and live, these are not ordinary times.
“The key to the real estate markets now is knowing how temporary or permanent the effects of the pandemic are going to be,” says Charlie Nathanson, an associate professor of finance at the Kellogg School.
Kellogg Insight recently spoke with Nathanson about the pandemic’s lasting impact on residential and commercial real estate.
This interview has been edited for length and clarity.
Kellogg INSIGHT: When we spoke in late 2020 about the pandemic, you predicted that higher prices and supply-chain uncertainty might influence demand for real estate, and that commercial properties might be converted to other functions such as warehousing. But at the time, there was a lot of uncertainty. Since then, what trends have surprised you and what are you keeping your eyes on?
Charles NATHANSON: One thing that has surprised me is the permanence of work-from-home. If you look at how many people are going to the office, it has decreased significantly. Even for people who returned to the office, it’s not every day. So if you only have to be in the office a few days a week, you’re willing to have a longer commute. Demand for more space in certain areas of the country has increased, which has boosted house prices.
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