Political Shifts Ahead: The Future of Commercial Real Estate
Danielle Davenport
Davenport Group | Program Management Entitlement, Development, and Investment. Offering Land Acquisition & Use Consulting, Disposition. Site(s) Selection to Build Out to Asset Management.
As we approach the presidential election, the commercial real estate market is in a holding pattern, waiting to see how fiscal and regulatory policies will be shaped by the results. These policies will directly influence taxes, environmental regulations, and economic incentives. But the impact goes beyond just the presidency.
Congressional and Local Elections
Congressional elections play a significant role, as legislators influence spending and policy direction. Additionally, local elections may be even more critical for commercial real estate, with outcomes affecting city and state policies on zoning, tax incentives, and building permits—factors that shape property development and investment.
Interest Rate Uncertainty
Interest rates have long been a key driver of real estate investment. The Federal Reserve’s decisions on rates can either fuel or cool the market. Currently, lower rates have made borrowing more attractive, spurring growth in investment and development. But there’s growing speculation that rates could rise again, which would likely slow down activity. Higher borrowing costs could dampen buyer enthusiasm, making it harder for them to secure favorable terms and reducing the flow of new projects.
Surge in Owner-Occupant Activity
An interesting trend in the commercial market is the increase in owner-occupant transactions. More businesses are choosing to buy the spaces they operate in rather than lease them. This shift reflects a growing desire for stability and control over their work environments, as well as confidence in long-term growth. Owning commercial property allows these businesses to build equity and avoid the volatility of rental markets. It’s a sign that some sectors feel optimistic about their future, despite the broader economic uncertainties.
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Market Response
Historically, the markets respond more to the broader macroeconomic landscape than to the election itself. If one party gains control of both Congress and the presidency, sweeping changes could follow. But under divided government, policies affecting multifamily and commercial real estate could face gridlock, slowing progress on new legislation.
Staying Adaptive
As we navigate the coming months, the commercial real estate market remains in a state of anticipation. The outcome of the election, the Fed’s rate decisions, and evolving business strategies all play a role in shaping the future of the industry. Taking a moment to step back and reflect on these factors allows us to better prepare for what’s ahead. In an environment marked by unpredictability, staying informed and adaptable will be essential to success.
Here's to navigating the waiting game and the market ahead!
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