Every political season—especially in presidential election years—we hear talk about the election’s potential influence on commercial real estate markets. But what does the data show? Is there really a significant impact, or is it more of a perception?
Pundits do discuss how much pre-election uncertainty and candidate policies affect real estate. Market activity may even decline as buyers and sellers adopt a “wait-and-see” strategy. And yes, candidates’ stances on tax and economic policies, interest rates, environmental regulations, and more can shape market expectations. While promises of tax cuts or incentives may stimulate demand, proposals viewed as detrimental to economic stability can dampen enthusiasm.
That said, how much is this year’s election affecting the CRE market—or are there other greater factors and forces at play?
By the numbers
To determine whether presidential elections impact the commercial real estate market positively or negatively, let’s look at the data. According to the National Multifamily Housing Council (NMHC), the average annual return on real estate investment trusts (REITs) was generally more in non-presidential than election years between 1994 and 2023. For example, REITs positively soared in 2021 (compared to their negative numbers in 2020).
Tighter restrictions on foreign ownership of U.S. property
There’s been a movement to restrict foreign ownership of U.S. property. Foreign entities own about 3% of private agricultural land in the U.S., with Canadians holding the greatest portion. Experts anticipate that the 2024 election outcomes won’t impact the momentum of bills—like the Food Security is National Security Act introduced by Sens. John Tester, Chuck Grassley, Debbie Stabenow, and Joni Ernst—moving through Congress.
Impact on 1031 exchange rules
Without action from Congress, the 2017 tax cuts enacted under the Trump administration will expire in 2025. A new administration could preserve the rules, although the current administration’s 2025 budget proposed limiting how much taxes someone could defer. Should 1031 exchanges be eliminated or restricted, sellers might opt for debt-financed “cash-out” transactions in lieu of property sales—a decision that would generate new opportunities for credit investors.
Keep the fundamentals in mind
A presidential election’s outcome rarely directly impacts someone’s finances—or decision to purchase or sell a home. That said, investors currently debating whether to buy or sell an investment property should base their decision on their own personal finances and broader economic indicators.
For example, earlier in September, the Federal Reserve cut interest rates by half a percentage point to 4.9%, indicating its belief that inflation is slowing. By the end of 2024, the Fed anticipates dropping rates to 4.4%. And by December 2025, borrowing costs could decrease to 3.4%, much lower than the 10-year high of 5.4%.
The stock market closed at record highs after the Fed’s announcement, although analysts “have noted that the stock market tends to pull back in the month leading up to a presidential election, as investors await the winner and with it greater clarity on the policy backdrop that could influence markets going forward.”
Investing? Keep these considerations in mind
News organizations and research institutions publish regular polls about who’s leading or trailing, and while those numbers can sway opinions (and decisions), generating accurate results is a challenge.
According to the Pew Research Center, “Fair or not, the accuracy of election polling is usually judged by how closely the polls matched the outcome of the election. By this standard, polling in 2016 and 2020 performed poorly. In both years, state polling was characterized by serious errors. National polling did reasonably well in 2016 but faltered in 2020.” Poll accuracy has also faltered when the ballots include Trump.
Instead of relying on polls to guide investment decisions, consider these factors:
- Trending interest rates and the Fed’s current perspective on financial policy
- Considerable property supply changes, like new construction projects or shifts in demand stemming from population movement
- REIT performance and trending rental prices, which can offer insights into the market’s direction
Also, look at the country’s overall economic health and the economic health of local markets you’re considering investing in. CPGs, employment data, the GDP, manufacturing activity, and other economic indicators affect real estate’s value. A healthy economy equals a healthy real estate market. If the economy becomes sluggish, so will the real estate market.
Evolving demographics can also impact home prices—just as interest rates affect property prices and demand. While low interest rates tempt more people to consider mortgages, more people begin looking for real estate. Demand increases—and so do prices.
Government policies can also impact property prices and demand. The government may boost demand via deductions, subsidies, and tax credits. Stay abreast of current government incentives to help plan your investment strategies.
Final thoughts
Can election uncertainty slow commercial real estate transactions and developments? Potentially, yes.
The political campaigns themselves can stimulate the economy, from hiring temporary workers to increasing demand for hospitality, office, and retail spaces. After all, campaigns need short-term leased properties to use as temporary headquarters. (It’s also interesting to see what happens to commercial properties once the campaigns no longer need them.)
Have you listened to any campaign speeches, read articles, or seen the ads? Political candidates’ investment promises can temporarly boost commercial real estate demand, particularly in construction, logistics, and transportation—but promises don’t equate reality once the election ends and the candidates take office.
Our advice? Ignore the political chatter and focus on your investment strategy. A well-diversified portfolio can weather any political tumult. Despite election-related noise, the U.S. market and economy remain fundamentally strong—a trend likely to continue regardless of who wins in November.
Are you a commercial real estate investor — or looking for a specific property to meet your company’s needs? We invite you to talk to the professionals at CREA United, an organization of CRE professionals from 92 firms representing all disciplines within the CRE industry, from brokers to subcontractors, financial services to security systems, interior designers to architects, movers to IT, and more.
