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Commercial Real Estate Performance Hinges More on Economy than Politics
With the selection of Donald Trump as the new president, commercial landlords, tenants and investors are focused on how new leadership in the nation’s capital will influence demand for space. However, according to Transwestern reports, the health of the commercial real estate industry hinges less on who sits in the White House and more on the general economic climate, which is relatively stable.
“The tapering business investment we’ve seen in 2016 is typical of presidential election years, as employers delay expenditures amid the uncertainty before Super Tuesday,” said Tom McNearney, chief investment officer. “Just as consistently, we anticipate spending will pick up again once the setting of the political stage returns some predictability to the market.”
In Transwestern’s newest edition of “the BRIEFING,” a report that provides insight into the effect the economy and global capital markets have on commercial real estate, McNearney explained that commercial real estate professionals and their clients will be better prepared to face challenges and opportunities by focusing on economic trends, which offer several positive indicators. Recent job gains, rising household income and 2.9 percent gross domestic product growth in the third quarter underscore potential for increased consumer spending and continued, although unspectacular, economic growth.
Furthermore, while history suggests that the economy has more often prospered under a Democratic president and under periods of Republican control on Capitol Hill, Transwestern research shows those trends to be more a matter of timing than political influence.
In a recent report, Elizabeth Norton, managing director of research for the Mid-Atlantic region, found that Republicans have held the White House more often in times of war and recession, when the economy struggled, while Democrats have held the Oval Office more often in periods of economic recovery and expansion. However, neither scenario necessarily reflects cause-and-effect relationships between policy decisions and the economic conditions at the time, she concluded.
“The selection of a new president is not expected to drastically alter the trajectory of the national economy, barring a recession, military conflict or other major event,” Norton said.
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