• Residential sales will experience a massive lift during the pandemic, according to Charles Nathanson, an associate professor of finance at the Kellogg School of Management.
  • More homeowners are looking to use their savings from limited vacation and entertainment spending for larger homes and spaces, especially as working remotely continues.
  • However, Nathanson predicts that commercial and rental real estate will be unstable, due to an uptick in moves, evictions, and unemployment. 
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The COVID crisis has thoroughly upended how people live, work, and shop. And this, in turn, has upended real estate markets.

Whether it’s tech workers abandoning dense urban cores for more space in the countryside, restaurateurs converting from dine-in to takeout, or companies suddenly going virtual while locked into an office lease, it’s clear that the ways we are using space — and the amount we’re willing to pay for it — are changing.

“The COVID crisis has led to a pretty big reallocation in the shares of goods that people spend money on,” said Charles Nathanson, an associate professor of finance at the Kellogg School.

“For a lot of people, it makes sense to dramatically increase the amount they are spending on the shelter because they’re spending so much more time at home,” he said. But, of course, the calculus looks quite different for companies renting office space for a workforce that may not be coming back anytime soon.

So what might we expect from residential and commercial real estate as we head into the year ahead?

“The key to the real estate markets now is knowing how temporary or permanent the effects of the pandemic are going to be,” said Nathanson.

Residential sales are a bright spot

When cities across the US went into lockdown in early 2020, several things happened