Real Estate and Factor Allocation

Commercial real estate is a particularly substantial asset on company balance sheets, and is associated with heavy adjustment costs. Owners can benefit from such assets in order to facilitate their access to bank financing, but are also more restricted in their mobility and in adjusting their production factors. Conversely, tenant companies tend to be younger and more dynamic, but may experience financial difficulties. This project thus studies this choice of ownership, the roles which the market and price levels can play, and the effect on production of mis-allocation of factors. The current health crisis context will also lead us to consider a scenario of declining commercial real estate prices and a possible repercussion of this on the conversion of professional spaces into residential spaces.