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Trump To Be Named 45th President Of The US, Now What?

WASHINGTON DC 07.12.2017

CAPITOL RIVERFRONT AND THE YARDS

Development Pipeline and Current Projects

Deborah Ratner Salzberg -- Forest City Washington
Janet Davis -- Brandywine Realty Trust
Richard Ruben -- Ruben Companies

In a shocking turn of events that neither the polls nor financial markets predicted, Donald Trump will become the 45th president of the United States of America after defeating Democrat Hillary Clinton.

Donald Trump

His path to victory was an unprecedented one, grabbing crucial battleground states like Florida and Ohio before breaking through the “blue wall” of typically Democratic-leaning states such as Wisconsin, Pennsylvania and Michigan that were imperative for Clinton’s success. A few initial reactions to Trump's win from commercial real estate professionals were as follows:

"I feel that President Trump will be a more practical individual than Candidate Trump, and that Congress will become more important in shaping policy than in previous years," Cushman & Wakefield senior managing director of NY Tri-State Ken McCarthy tells Bisnow. 

Transwestern SVP and senior director of CRE in Silicon Valley Ed Mendence expressed joy and confidence in Trump's ability to "restore prosperity to the country." Ed tells Bisnow he does not doubt Trump's ability to reduce the corporate tax rate, creating massive job growth and business expansion for the country. 

"If he can reduce it to 15%, it could bring prosperity because corporations can flourish," Ed tells us. "There is $2.5 trillion to $3 trillion of American capital overseas because they don't want to pay that tax rate."

Trump’s victory signifies a coming shift in global policies surrounding free trade, immigration and international finance promised on the campaign trail, and the win has certainly dealt a shocking blow to global financial markets, with stock futures plunging the night of the election.

“World financial markets and the central banks in many nations are reeling with the prospect of having to deal with the president-elect, especially given some of the policy statements he made during the campaign,” Yardi director of research and publications Jack Kern tells Bisnow.

Jack says he suspects volatile markets will calm as advisers to the White House rein in rhetoric from the race and propose more reasonable positions.

“Trump for the most part will avoid controversy in his first 100 days if he can help it,” he says.

A Quick Recovery For US Markets

Financial Markets, Bonds, Stock Market

US markets seemed to brush off the tumult Wednesday morning as stocks inched higher, according to the Wall Street Journal. The Dow added 63 points during early morning trading Wednesday and the S&P 500 rose 0.2%, as did the Nasdaq Composite.

“S&P and the Dow are both up, which is amazing,” Matthew Cypher, director of Steers Center for Global Real Estate at Georgetown’s McDonough School of Business, tells Bisnow. “It’s just going to take some time to process. Uncertainty is not anybody’s friend, real estate or not. Everybody thought the world was ending with Brexit, and I’m not sure this is much different in terms of shock value.”

Other experts also are likening the surprising win to Brexit. Britain’s decision to leave the European Union in June was the first major political shock global economies faced this year, leaving European officials reeling and sending the British pound to a 31-year low.

Similar to the number of people surprised by Brexit’s outcome, Trump supporters were consistently underestimated in the polls, and few foresaw his victory.

“Once again, just like after the EU referendum outcome, we are left with more questions,” Colliers International London chief economist Walter Boettcher tells us, raising a series of questions including the following: How isolationist will the US become under Trump? Is the EU-US trade deal dead? How much will immigration controls be tightened? Will Trump try to make good on his various bombastic policy ideas, or was this all just hyperbole? 

"Time will tell, but do not look for any clear indicators until the end of the year—and even then, the likelihood is that his policies will only become clear after his first 100 days,” Walter says. 

What This Means For Real Estate

US economy

Although it’s still too early to determine how a Trump presidency will impact global economies in the long term—as much of Trump’s policies have yet to be clearly outlined—most real estate professionals are curious about the impact his win will have on the industry.

Georgetown's Cypher tells us that if the economy continues its upward trajectory—with GDP up to 2.9% in Q3, the labor market nearing full capacity and healthy consumer spending—real estate should remain strong.

“There’s going to be a near-term pause to digest, but there’s still a ton of capital in the system,” Matthew tells us. “I think everybody is going to sit tight for a while and see how this goes over the next couple of weeks. Anything beyond that at this point is speculation.”

Yardi's Jack Kern says the industry might be in for a few hits. “The first shock is that a real estate guy is now the president-elect. I don’t think anyone ever believed that was possible or likely,” Jack says, adding that the pace and intensity of CRE may slow as owners and investors wait to see what the new administration and still-Republican-controlled Congress propose.

VTS regional director Matt Giffune agrees, telling Bisnow that any time there's a national election CRE is impacted alongside the US economy. 

"From our perspective, commercial real estate owners and brokers are still weighing decisions to lease space and buy and sell buildings," Matt says. "As a result, this is when having access to real-time data becomes more critical than ever, as it enables players to make more informed decisions, faster." 

As for the likeliness of a December interest rate hike amidst all of this economic volatility? Experts say it’s a toss-up.

“The Federal Reserve is now in a can’t-win position where if they raise the rate in December it will be seen as trying to invoke policy before the new president takes office and has a chance to offer his views,” Jack says. “[But] if they fail to raise rates, it will be seen as a political decision implying they are trying to curry favor with the new Trump administration.”

Carl R. Zwerner chair of economic forecasting at Georgia State University Rajeev Dhawan is convinced a December rate hike will happen, pointing to the reaction of the 10-year bond market as an indicator. 

"The December hike is very much in the cards," Rajeev says. "The real issue is what after that? CRE valuations will fluctuate a lot in coming months as investor sentiment ebbs and flows, but barring a Fed rate hike trajectory in 2017 that is even steeper than their 2016 September dot chart, it should be fine."