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The Politics of CRE

October 31, 2016

Every four years, the commercial real estate market slows, coming nearly to a complete halt before jumping into action once more – all as a result of national uncertainty. It’s not a function of business so much as it is one of politics. But, no matter how you plan to vote, the upcoming election may have less impact on the market than you’d expect.

While each political party claims to work for economic improvement, employment growth has varied by president. Analysts have used total employment as a gauge of how well the economy is managed, and with these figures in mind, no party can definitively claim it is better at growing jobs. What’s more, when you review the size of U.S. government, Kennedy, Johnson, Carter and Reagan added to government labor while Clinton, Obama and George H. W. Bush cut positions; party lines seem blurred here as well.

The impact of the current political climate on the future of commercial real estate figures is yet to be seen, but the National Association of Industrial & Office Properties released a recent study showing that the market does seem to be slowing. Employment, occupancy rates and available debt are all slightly down on a national level, possibly as a result of the uncertainty surrounding national and local election outcomes.

One of the factors considered in the NAIOP report is the sentiment index. This index is determined by directly asking respondents how they feel about the conditions within the commercial real estate industry over the next year. Responses in the most recent report were an average of 2.5 percent more negative compared to six months prior.

The best way to buck political trends within the commercial real estate market is to remain engaged, both within the marketplace and political dialogue. Some excellent investment opportunities may arise as a result of slowed market activity, just as opportunities to further the interests of real estate professionals may appear on ballots. As politics, business and real estate continue to be intertwined, it is telling that The National Association of Realtors is the second largest national lobby in the country, just behind the U.S. Chamber of Commerce.

As a new president takes office in January, change is bound to occur, but the impact on local and national economies is likely to play out gradually in the years to come. The immediate future of commercial real estate still provides opportunities for growth and profit – something we can all get behind.