One of the fundamental rights we hold as citizens of the United States is the power to vote and express our political preferences. Federal elections are held every four years, and congressional elections are held every two. The months leading up to November during these election cycles often leave Americans uncertain about the commercial real estate market.

According to the Head of Research for Commercial Banking at JPMorgan Chase, “History tells us that markets can get volatile around elections, but it’s usually temporary and related to uncertainty.”

Despite the results, the impact on the real estate market is more driven by the economic outlook and investors’ perceptions than by the election results.

A Time of Opportunity

Historically, the pre-election period has had minimal impact on the real estate market. In many ways, it may be a time of opportunity – presenting unique opportunities. With buyers and sellers often hesitant to act, this supply constraint can lead to quicker sales at premium prices.

The Political Landscape and Investment Returns

While changes in political parties may create uncertainty, data indicates they have little impact on real estate investment returns.

Investors should focus on broader economic factors such as supply and demand, interest rates, and inflation rather than getting sidetracked by who resides in the White House. Key drivers will always remain at the forefront of evaluating the market and commercial real estate investments.

Fundamental Policy Changes to Monitor

When evaluating the market, investors should consider economic trends on a broader scale rather than allowing politics to sway decisions regarding their real estate investments.

Here are a few potential policy changes that could impact the future of the commercial real estate market:

• Foreign Ownership: Shifts in policies concerning foreign investors’ ownership of American real estate may impact the landscape for international real estate investments. Staying informed about these shifts is crucial for foreign investors.
• Tax Policies: Modifications in tax laws can impact capital gains, depreciation, and corporate taxes, influencing overall profitability.
• 1031 Exchanges: Modifying 1031 Exchange policies could incentivize sellers to opt for financing-based deals instead of outright real estate sales.

Beyond the Headlines

Although elections often dominate the media, their direct influence on the commercial real estate market is minimal. While government policies can affect business optimism and investment decisions, crucial market drivers, such as construction costs, demographic trends, urbanization, and technological advancements, remain at the forefront for savvy commercial real estate investors.

Conclusion

As you navigate the commercial real estate market during this election cycle, focus on long-term trends and fundamentals. Elections may stir up chaos, but a savvy investor understands where to focus on true opportunities.

While elections may introduce short-term uncertainty, they seldom significantly change the commercial real estate landscape. Investors concentrating on market fundamentals, emerging trends, and value enhancement will discover opportunities regardless of political shifts.

DH Realty Partners is here to provide expert assistance in navigating this complex landscape. To learn more about our customized services, please visit www.dhrp.us or call us at 210.222.2424. We would love to assist and partner with you in your commercial real estate journey.

SOURCES:

https://www.jpmorgan.com/insights/real-estate/commercial-term-lending/elections-impact-on-commercial-real-estate

https://www.forbes.com/councils/forbesbusinesscouncil/2024/09/11/2024-us-elections-what-should-real-estate-investors-know/

https://www.friedmanrealestate.com/historical-data-indicates-election-years-have-little-effect-on-cre-investment/