Working Papers

Tenant Riskiness, Contract Length, and the Term Structure of Commercial Leases

Under Review | Last updated: February 2024

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This paper explores the connection between tenant riskiness, commercial lease length and the term structure of lease contracts. Theory shows that the possibility of default on a long-term lease generates a risk/lease-length connection. The empirical work uses a large CompStak lease dataset combined with tenant characteristics (including risk) from Dun & Bradstreet. Regressions show that lease length is inversely related to the D&B risk measures, as predicted, and that risky tenants pay a higher rent premium for long-term contracts than low-risk tenants. The presence of such tenants thus raises the slope of the term structure of commercial rents.

Owned Now Rented Later? The Effect of Housing Stock Transitions on Affordable Housing and Market Dynamics

Under Review | Last updated April 2020
 

This paper shows that own-to-rent housing stock transitions provide a long run source of affordable housing while slowing recovery following a shock. Based on multiple linked surveys for the United States, there is a 2 percent net shift of existing SFD housing into rental status with each passing decade. Short term transitions can be larger and exceed 10 percent for recently built homes following the 2007 crash. Short run effects also partly reverse as markets rebound, depressing new construction. At the MSA level, roughly 25 fewer single family permits are filed for every 100 own-to-rent transitions of recently built homes.

Why Do Home Prices Appreciate Faster in City Centers? The Role of Risk-Return Trade-Offs in Real Estate Markets

Under Review | Last updated: April 2022

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In large urban areas, home prices appreciate faster in city centers, in part because of risk-return tradeoffs that vary in response to differences in housing supply constraints and volatility. This echoes a similar pattern across cities. Within urban areas, location-specific risk is most important, while across cities, systematic risk dominates. A one standard deviation increase in the dominant source of risk increases total housing returns by 22.7% and 12.2% within and across cities, respectively. It is well-known that home price levels vary spatially. Our findings indicate that spatial differences in home price appreciation rates can also persist in equilibrium.

Eyes on the Street, Spatial Concentration of Retail Activity and Crime

Under Review | Last updated December 2023

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If spatial concentration of retail establishments amplifies the effect of “eyes on the street”, that should lower neighborhood crime rates and reduce investment in anti-crime measures, with benefits capitalized into higher retail rent. Data for New York City supports these predictions. In addition, comparisons between nighttime versus daytime crime, pre-pandemic versus COVID-19 lockdown, and different measures of spatial concentration shed light on mechanisms. Under plausible identifying conditions, increasing neighborhood concentration of retail outlets by one standard deviation reduces property crime and police stops by at least 8.5% and 11%, respectively, and causes retail rent to increase by at least 7.8%.