<p>This paper investigates the impact of corporate real estate investment on the financial performance of listed non-real estate firms. Using corporate finance and land transaction data in China, our findings reveal that real estate investments by non-real estate firms are less efficient compared to those made by real estate firms, despite a contagion effect driving real estate investment fever among institutional investors. Exploiting the home purchase restriction policy as an instrument, our baseline results show that, in the short run, real estate investments hinder profitability, increase leverage, and reduce liquidity, negatively affecting the performance of core businesses. While the collateral channel remains significant, these adverse outcomes are primarily driven by the crowding-out channel and snowballing consequences. In the long run, real estate investments lead non-real estate firms to reallocate resources from innovation to land market investments, undermining their growth potential. Our findings provide new insights into the negative contagion effects among institutional investors in the real estate market and have significant implications for the broader economy and government regulations regarding cross-industry investment activities.</p>