A presidential election is a pivot point for economic policies, regulatory frameworks and market sentiment, all of which impact the commercial real estate (CRE) industry.
With Trump back in office after the 2024 U.S. presidential election, many in the CRE space are expecting big changes. As a developer turned politician, Trump’s policies will bring a mix of opportunities and headaches for lenders, investors, and real estate pros.
From tax reform to deregulation and interest rates to property development, presidential policies impact everything. For example, during Trump’s last term, the Tax Cuts and Jobs Act of 2017 led to a surge in real estate investments by lowering corporate tax rates.
Will that be the case again?
In this article, we’ll look at how the 2024 election results will impact the CRE industry, focusing on tax policy, regulatory changes, and market trends. We’ll also give you strategies to navigate this new landscape and make smart decisions post-election with Blooma’s platform.
Key Policy Areas Affecting CRE
The 2024 presidential election brings attention to policies that directly impact the CRE industry. With Trump back in office, several areas will get a second look, affecting property values, investment strategies and market demand.
These include:
- Taxation and Incentives: Tax policy is key in CRE. During his last term, Trump’s administration passed the Tax Cuts and Jobs Act of 2017 which lowered corporate tax rates and expanded depreciation benefits for real estate investors. Will that be the case again? A similar approach could mean more investment and development opportunities.
- Land Use and Development Regulations: Federal support for infrastructure development and deregulation has been a part of Trump’s economic agenda. Relaxing land use and zoning laws could speed up commercial property development, especially in suburban and rural areas. But changes to these regulations could also mean competition for urban land and shift investment priorities.
- Environmental Regulations: Rolling back environmental regulations, such as relaxed building codes or energy compliance standards, could reduce development costs for property owners and developers.This could also impact long term sustainability planning and demand for green certified properties and environmentally conscious investments.
- Interest Rates and Monetary Policy: Pro business fiscal policies can mean less government oversight and more liquidity plus lower interest rates for commercial loans. Lower borrowing costs can drive demand for new projects and property acquisitions.
- Impacts on Market Demand: Policy changes that create jobs, lower taxes or help grow businesses can drive demand for office, industrial, and retail space.
Taxation and CRE Investment
Changes in federal and state property tax policies can directly impact the cost of owning and maintaining commercial real estate in the following ways:
- A reduction in property taxes can drive more investment in development projects especially in underutilized areas.
- Higher property taxes can dampen investor appetite and cause asset re-evaluation.
For example, if Trump’s administration revisits previous tax cuts or introduces new legislation to lower capital gains taxes, it can drive more transactions as investors look to take advantage of the situation. But if changes include eliminating some deductions or raising long-term rates, it can slow down investment activity.
Tax incentives like opportunity zone programs may also be revived or expanded. These programs designed to attract investment in distressed areas can give investors significant tax benefits and can drive development in targeted areas.
Corporate tax rate changes can also impact businesses ability to lease or buy commercial properties and overall market demand.
Historical examples show how tax policy impacts the CRE market. For instance:
- The Tax Reform Act of 1986 changed some real estate tax shelters and property values, leading to an investment activity decline in the late 1980s.
- The Tax Cuts and Jobs Act of 2017 drove a wave of investment due to its depreciation benefits and lower corporate tax rates.
Land Use Policies and Development
Zoning laws dictate what kind of buildings can be built in certain areas, residential, commercial and mixed use. A Trump administration’s focus on deregulation could mean some zoning restrictions get relaxed and create new opportunities for CRE development.
For example, policies that encourage mixed use projects or converting underutilized space to affordable housing could drive growth in urban cores.
On the other hand, if zoning gets stricter in some areas to address community concerns like overcrowding or environmental impact, developers will face higher compliance costs and longer approval times.
Changes to environmental policies, like wetlands or emissions regulations, can impact land development. A roll back of environmental regulations could speed up project timelines and reduce costs for developers. But it could also spark opposition from local communities and advocacy groups which creates reputational or legal risks.
Policy changes can also drive redevelopment projects, especially in areas hit hard by economic downturns or demographic shifts. Incentives for adaptive reuse such as repurposing existing buildings like old warehouses or office buildings can be lucrative for investors and address market demand for sustainable development.
Finally, In rural areas, relaxed land use restrictions could drive large scale commercial development like logistics hubs or renewable energy projects. In urban areas, there will be more regulatory scrutiny as cities balance growth with gentrification and infrastructure strain.
What Should CRE Professionals Do?
Understanding the direction of land use policy is key to planning.
Developers and investors need to be proactive by engaging with local government and advocacy groups to anticipate regulatory changes and stay compliant.
By adapting to the new policies, they can unlock opportunities and mitigate the challenges in the changing landscape while keeping a finger on the pulse.
Environmental Regulations and Sustainability Initiatives
Under a Trump administration, a focus on reducing regulations could mean a rollback of stricter environmental regulations that impact CRE development. For example:
- Relaxing Energy Efficiency Standards: Federal energy efficiency requirements for new and existing buildings could be scaled back, reducing upfront costs for developers.
- Simplifying Building Code: Deregulation could make it easier to comply with green building codes and faster project approvals but less incentive to go green.
Despite potential federal rollbacks, market demand for sustainability is growing.
Real estate professionals are incorporating eco-friendly design to attract eco-minded tenants and investors. Here’s where you can make a difference:
- Green Building Certifications: LEED and WELL are still key to making your property more attractive and getting top dollar.
- Renewable Energy: Solar panels, wind energy, and other renewables are becoming standard in new buildings to meet tenant expectations and reduce operating costs.
- Resilient Infrastructure: Climate change is driving investments in flood-proofing, storm-resistant design and energy-efficient retrofits.
Environmental, Social and Governance (ESG) criteria are still influencing investment decisions as institutional investors are prioritizing portfolios that meet tough sustainability standards.
Even if federal environmental policies relax, many state and local governments and private sector stakeholders will still require or even increase sustainability standards.
What Should CRE Professionals Do?
CRE professionals need to navigate the gap between federal policy and market expectations. While deregulation may reduce short-term operational headaches, not incorporating sustainability initiatives will reduce market competitiveness.
To succeed in this changing world CRE companies should:
- Stay up to date on local and state environmental regulations that will counteract federal rollbacks.
- Get ahead of the curve on sustainable building practices to meet tenant and investor demands.
- Harness green technology for long-term cost savings and to appeal to eco-conscious stakeholders.
Infrastructure Spending and CRE
A Trump administration will likely focus on infrastructure investments in:
- Roads and Highways: Better connectivity will benefit industrial and logistics properties by simplifying supply chain operations.
- Energy Infrastructure: Pipelines, energy grids, and alternative energy hubs will open up new opportunities for CRE in emerging industrial corridors.
- Telecommunications: 5G networks and broadband expansion will drive growth in data centers and tech parks, creating new CRE niches.
Such infrastructure projects impact multiple CRE sectors such as:
- Industrial Properties: Better transportation networks simplify logistics hubs and distribution centers.Being near modernized infrastructure makes industrial assets more desirable, potentially increasing rental income.
- Retail: Improved roads and public transit makes shopping centers more accessible to consumers, more foot traffic. Infrastructure in suburban or rural areas will create demand for retail space as those areas develop.
- Multifamily Properties: Better public transportation will increase rental demand in areas that were previously inaccessible. Utility infrastructure will enable new residential development to meet population growth.
- Office: Being near transportation hubs is a competitive advantage for office buildings, especially in suburban areas as hybrid work continues.
Infrastructure also impacts CRE desirability and value. Benefits include:
- Higher Value: Properties near infrastructure upgrades see more demand and higher values.
- Higher Rental Yields: Infrastructure improvements attract more tenants and higher rents.
- Lower Vacancy: Properties in well-connected areas have sustained demand and less vacancy risk.
However, there are some challenges to consider:
- Disruption During Construction: Infrastructure projects can reduce property access and deter tenants.
- Cost Implications: Higher property values mean higher taxes and operational costs.
- Uneven Development: Not all areas will benefit equally and growth will be uneven.
What Should CRE Professionals Do?
CRE professionals can get ahead of the infrastructure curve by:
- Identifying areas of big infrastructure spend and buying in those areas.
- Working with the local government to align development projects with infrastructure initiatives.
- Taking a long-term view as infrastructure benefits often take years to materialize.
Infrastructure spend when aligned with CRE strategy is a big opportunity to increase property value, attract tenants, and drive growth.
By being informed and agile, CRE professionals can get the most out of these game-changing policies.
Interest Rates and Financing Conditions
Presidential administrations influence monetary policy indirectly through their economic and fiscal priorities. A Trump administration may:
- Prioritize Economic Growth: Growth policies will push the Fed to keep or lower rates to encourage borrowing and investment.
- Deregulation: Reduced regulatory burden in financial markets will make funding more favorable for CRE borrowers.
Interest rate changes have a flow-on effect across CRE:
- Borrowing Costs: Lower rates means lower borrowing costs so investors can finance acquisitions and developments more easily. Higher rates means higher debt service costs and reduced margins.
- Property Value: Lower rates means higher property values as reduced borrowing costs makes investments more attractive. Higher rates mean lower values, especially for highly geared properties.
- Investor Behavior: Rate changes affect investor behavior. Lower rates mean more speculative or long term investment and higher rates means more stable income producing assets.
Potential scenarios to expect under the Trump administration include:
- Stable or Lower Rates: If the administration gets policies right for the Fed, CRE investors get more access to cheap capital. Mortgage lenders and other corporate lenders will see a flood of loan applications for acquisitions, refinancing and development projects.
- Rising Rates: If economic policies create inflation fears, the Fed will hike rates and cost of capital goes up. Investors will focus on properties with stable cash flow or look for alternative funding.
What Should CRE Professionals Do?
Investors and lenders can prepare for rate uncertainty by:
- Diversifying: Mitigating risk by investing across asset classes and geographies.
- Locking in Rates: Using current rates for long term financing or refinancing existing loans.
- Exploring Alternative Financing: Looking at partnerships, joint ventures, or private funding to reduce dependence on traditional loans.
Beyond rates, broader financing conditions like lender appetite, credit standards and market liquidity matter. A Trump administration will mean:
- Easier Credit: Encouraging banks and credit unions to lend more CRE
- More Capital: Opening doors for small businesses and new developers
CRE players should be aware of both election policy changes and Fed signals. To make the best of these scenarios:
- Stay close to lenders to see what’s changing
- Review loan portfolios regularly to stay on top of the market
- Talk to financial advisors to scenario plan and make better decisions
Blooma’s Tools for Navigating Post-Election Markets
As the commercial real estate market adjusts to the 2024 election results, having the right tools to navigate the changes is key.
Blooma has the tools to help CRE pros adapt fast, manage risk and capitalize on the opportunities in the new world.
Real-Time Data for Informed Decision-Making
In post-election markets where policy changes and economic shifts can have an immediate impact, real time data is key. Blooma’s platform has:
- Market Intelligence: Current information on market trends, lending conditions and property performance so you stay ahead of the curve.
- Custom Dashboards: Analytics that let lenders and investors focus on the metrics that matter to their portfolios and goals.
Predictive Analytics to Anticipate Change
Blooma uses predictive analytics to help CRE players prepare for various scenarios through:
- Market Trend Forecasting: How will changes in tax, infrastructure spending, and monetary policy impact property values and investment strategies?
- Loan Risk Assessment: Evaluate credit risk in real-time so lenders can make decisions in an uncertain world.
- Opportunity Identification: Find properties or projects that align with emerging market conditions so you can act fast.
End-to-End Support for Risk Management
Elections bring new risks – regulatory changes, interest rate fluctuations. Blooma’s platform provides support through:
- Risk Analysis: See how policy changes will impact your loan portfolio so you can manage risk.
- Scenario Planning: Test different market conditions to see how different outcomes will affect profitability and loan performance.
Boosting Operational Efficiency and Collaboration
In post-election markets, flexibility is key, and Blooma helps CRE professionals with tools to simplify and team up through:
- Automated Workflows: Simplify underwriting and loan approval processes, reduce time-to-close and boost productivity.
- Integrated Communication: Keep your team on the same page with centralized data sharing and real-time collaboration.
Positioning for Growth
With one platform for data, analytics, and collaboration, Blooma creates opportunity by helping:
- Adjust to Policy Changes: Quickly align your investment and lending strategies with new regulations or economic priorities.
- Find Growth Areas: Focus on sectors or regions that will benefit from election-driven changes – infrastructure spending or tax favors.
- Make Strategic Decisions: Use your insights to build better portfolios and partnerships.
Stay Ahead with Blooma
From tax and land use to environmental and infrastructure, every part of the CRE landscape is up for change.
Staying ahead of it all is crucial for CRE professionals.
Blooma’s CRE platform gives you the right tools to adapt, strategize and succeed. With real-time data, predictive analytics, and streamlined workflows, Blooma helps you navigate uncertainty, optimize investments, and capitalize on election outcomes.
Don’t let uncertainty hold you back. Work with Blooma’s commercial lending software to:
- See market trends and policy impacts.
- Streamline your loan origination process.
- Make data-driven decisions with predictive analytics.
Try Blooma’s full platform now and get ahead in the CRE game.
Request a demo to see how Blooma can change the way you lend and invest in commercial real estate.