Search Results
Working Paper
On Commercial Construction Activity's Long and Variable Lags
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long—about 1.5 years—and highly variable, (2) roughly 40 percent of projects are abandoned in planning, and (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. The model has the testable implication that supply is more elastic when there are more "shovel ready" projects available to advance to construction. We use local projections to ...
Discussion Paper
From Plans to Starts: Examining Recent Trends in Manufacturing Plant Construction
Manufacturing structures investment is the largest component by value of U.S. nonresidential structure investment and has been growing quickly in the post-pandemic period. Figure 1 documents the significant extent to which the construction of manufacturing plants has contributed to growth in overall nonresidential construction. The surge in investment in manufacturing construction has occurred despite the higher interest rate environment, driven by government incentives associated with the Inflation Reduction Act (IRA) and the CHIPS and Science Act (CHIPS), and market forces such as increased ...
Working Paper
CRE Redevelopment Options and the Use of Mortgage Financing
A significant share of commercial real estate (CRE) investment properties—about half by our estimates—are purchased without a mortgage. Using comprehensive microdata on transactions in the US CRE market, we analyze which types of properties are purchased without a mortgage, highlighting the important role of renovation or redevelopment options. We show that mortgage-financed properties are less likely to be subsequently redeveloped, and that owners anticipate these redevelopment frictions and avoid mortgage financing for properties with greater redevelopment options. These effects were ...
Working Paper
Loan Modifications and the Commercial Real Estate Market
Banks modify more CRE loans than CMBS, contributing to better loan performance when property incomes decline. However, banks have higher delinquency rates for less-stressed loans, consistent with modification policies encouraging strategic default. Motivated by these facts, we develop a tradeoff theory model in which lenders vary in their modification technologies. Modification frictions discourage strategic renegotiation, enabling CMBS to offer higher LTV loans and attract borrowers seeking higher leverage. The model produces cross-lender differences in LTVs and spreads consistent with the ...
Working Paper
Loan Modifications and the Commercial Real Estate Market
Banks modify more CRE loans than CMBS, contributing to better loan performance when property incomes decline. However, banks have higher delinquency rates for less-stressed loans, consistent with modification policies encouraging strategic default. Motivated by these facts, we develop a tradeoff theory model in which lenders vary in their modification technologies. Modification frictions discourage strategic renegotiation, enabling CMBS to offer higher LTV loans and attract borrowers seeking higher leverage. The model produces cross-lender differences in LTVs and spreads consistent with the ...
Discussion Paper
Trends in Credit Unions' Share of U.S. Private Depository Household Lending
Before examining trends in lending, it is useful to first examine trends in the financial assets of the institutions more generally.