When the U.S. housing market boomed and busted in the past decade, commercial real estate was comparatively placid. Prices were more stable, there was little overbuilding, and bankruptcies never soared. The question is why. A research paper attributes the stability of commercial real estate at least in part to the “civilizing influence” of real estate investment trusts, which are a bigger presence in the market than they are in housing.
“REITs played a central role” in discouraging speculation in commercial real estate of the kind that led to doom in housing, write the authors. “Commercial markets stayed in balance throughout the biggest real estate bubble in the United States since the 1920s.”