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Commercial real estate: is there a risk of a financial bubble?
[Immobilier commercial : un risque de bulle financière ?]

Author

Listed:
  • Jérôme Coffinet
  • Thomas Ferrière
  • Dorian Henricot

Abstract

Commercial real estate prices have been rising steadily for a number of years. In France in particular they are now higher than they were before the 2008 crisis. These high valuations appear consistent with the economic fundamentals – notably the low interest rate environment and tightness in supply relative to demand in certain segments of the market. However, the fundamentals currently differ markedly from historical levels, raising the risk that prices might correct downwards in the event of a sudden rise in interest rates or a deterioration in the economic outlook. If this were to happen, the systemic consequences would most likely be limited as commercial real estate only accounts for a small share of financial institutions’ exposures. However, we cannot rule out a possible contagion to firms and, to a lesser extent, households.

Suggested Citation

  • Jérôme Coffinet & Thomas Ferrière & Dorian Henricot, 2018. "Commercial real estate: is there a risk of a financial bubble? [Immobilier commercial : un risque de bulle financière ?]," Bulletin de la Banque de France, Banque de France, issue 219.
    • Handle: RePEc:bfr:bullbf:2018:219:02
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    References listed on IDEAS

    as
    1. Thomas Chaney & David Sraer & David Thesmar, 2012. "The Collateral Channel: How Real Estate Shocks Affect Corporate Investment," American Economic Review, American Economic Association, vol. 102(6), pages 2381-2409, October.
    2. Denise DiPasquale & William C. Wheaton, 1992. "The Markets for Real Estate Assets and Space: A Conceptual Framework," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 181-198, June.
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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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