Transwestern: CRE Performance Hinges on Economy, Not Politics

The commercial real estate industry’s health hinges less on who occupies the White House and more on the general economic climate, which remains relatively stable, said Transwestern, Houston.

“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 Transwestern Chief Investment Officer Tom McNearney. “Just as consistently, we anticipate spending will pick up again once the setting of the political stage returns some predictability to the market.”

McNearney said 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,” he said.

Furthermore, while history suggests that the economy has more often prospered under a Democratic president with Republicans controlling Congress, Transwestern called those trends “more a matter of timing than political influence.” 

Transwestern Managing Director of Research for the Mid-Atlantic Region Elizabeth Norton noted that Republicans have held the White House more often during wars and recessions when the economy struggled, while Democrats have held the Oval Office more often in economic recovery and expansion periods. But neither scenario necessarily reflects cause-and-effect relationships between policy decisions and the economic conditions at the time, she said.

“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. “In addition, the newcomer will be inheriting a sizable deficit that promises to hamper federal spending.”

Norton noted that even with the modest employment growth that some economists currently project for the near term, “we expect only incremental gains in office demand, as tenants attempt to control costs by consolidating space and maximizing efficiency through smart workplace strategy.”