How CRE Stacks Up Beneath Democratic, Republican Administrations

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How CRE Stacks Up Under Democratic, Republican Administrations

The choice is now two weeks away. While the two presidential candidates present very different visions for the country, there is likely to be little difference in commercial property performance, according to a new report from Newmark Group.

Over the past 40 years, the total annual return has averaged 9% among Democratic presidents and 8.2% among Republican presidents. In the report, Newmark says economic and geopolitical factors are likely to have a bigger impact on office or home fundamentals than the responsible political party.

"The outside events that are not directly controlled by American public policy tend to have a much bigger impact on the commercial real estate market than the Washington specifics," said Sandy Paul, senior managing director of national research at Newmark Knight Frank & # 39; s Washington, DC office shares GlobeSt.com.

The cheaper office fundamentals of the past two decades, Newmark said, arose when Republicans controlled Congress. At the time, the average absorption from US offices was 40.8 million square feet per year, well above the 20-year average of 16.1 million square feet per year. When the Democrats controlled Congress, the average office absorption was 6.3 million square feet per year.

On the multi-family side, the effective rent change under Democratic President Barack Obama averaged 2.7%, which is well above the 20-year average of 2.0% and the 1.6% average under Republican President George W. Bush and Donald Trump lay.

Paul says this is more of a correlation than a cause of both multi-family and office performance. The proliferation of high-paying tech jobs in major U.S. multi-family markets has fueled this growth when it is the policy of either of the two major political parties.

"If you'd like to go a little deeper, we can speculate that during the Great Recession, which spanned roughly the first year of the Obama administration, market fundamentals favored a more defensive stance and the diverse multi-family homes tended to be more defensive investing," says Paul. "It's good counter-cyclical."

Paul says there's a long-standing theory that when a single party is in control of Washington, there is significantly more spending. It is also believed that it is much easier to pass bills that dramatically affect the economy and real estate market when there is control by one party. However, this is not necessarily the case.

"Research shows that there is a lot more going on in the world than party control," says Paul.

Ultimately, the most important impact elections have on real estate is economic uncertainty, which may be even more pronounced in the turbulent 2020 cycle. According to Paul, the average job growth in election years was 1.7 million, slightly more than the average annual job growth of 1.5 million for 40 years.

"In other words, election years are not always more volatile than the year around them," says Paul.

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