THE RELATIONSHIP BETWEEN CORPORATE REAL ESTATE AND DEBT THROUGHOUT THE COVID-19 PANDEMIC

Abstract

The study analyses the relationship between the Corporate Real Estate (CRE) share and corporate leverage of global companies throughout the COVID-19 pandemic. The literature review extensively discusses the various impacts of the pandemic on firms, the CRE sector and debt. Firstly, the pandemic resulted in a decrease in sales and business activity worldwide, although this effect varied across countries, industry sectors and firm sizes. Notably, companies in contact-intensive industries were more vulnerable to pandemic-related disruptions. Secondly, the pandemic had a disproportionate effect on the CRE sector across various real asset classes, driven by pandemic-induced trends of remote working and e-commerce. Thirdly, the pandemic also caused a decrease in the level of corporate leverage adopted by firms. The research methodology in this study involved two analytical approaches. Firstly, multivariate regression analysis showed a positive correlation between CRE share and corporate leverage, and vice versa. Secondly, pivot table graphical analysis demonstrated a decrease in the CRE share of firms across different industries, while changes in the corporate leverage of firms differed among various industries. Moreover, firms with a higher pre-pandemic CRE share generally observed a greater increase in corporate leverage after the pandemic, although this was not the case in all scenarios. Ultimately, the analysis offers valuable insight on the corporate strategies implemented by businesses in various industry sectors after the pandemic, which have influenced the fluctuations in CRE share and leverage. Consequently, the contributions of this study will significantly enhance corporate decision-making, especially in the realm of CRE.