Bisnow Survey: CRE Worried About Higher Taxes, Gridlock, More Shutdowns In A Biden Presidency
In the wake of the U.S. presidential election, commercial real estate professionals are eyeing the future with some trepidation. Higher taxes, political gridlock, more regulation and the potential for further pandemic-related shutdowns are just some of the issues worrying the industry as President-elect Joe Biden stands poised to assume the presidency in January.
Bisnow surveyed 1,042 commercial real estate professionals between Nov. 10 and Nov. 13 to find out how the industry views the results of the election. The results showed the same political division, heated emotions and worries playing out in the country at large.
Respondents lobbed insults at the candidates, calling President Donald Trump “vengeful, narcissistic and self-serving” and Biden “senile, corrupt and feckless.” Respondents accused both political parties of destroying the United States and refusing to compromise.
But almost across the board, respondents said they hope the next four years can be less tense, less angry and less of a media firestorm.
“Hopefully politics can become boring again,” one respondent wrote.
Bisnow’s survey indicated growing support for Trump: Although 43% of respondents said they identify as Republican, 55% said they voted for Trump in this election, up from 50% who said they voted for him in 2016.
Only 19% of survey respondents said they identify as Democrat, while 32% said they are independent and 3% identified as other. Forty percent of respondents said they voted for Biden.
The largest share of respondents are based in Texas (17%), followed by California (12%), Georgia (12%) and New York (7%).
Commercial real estate-specific issues were low on the list of reasons survey participants selected a candidate, with only 33% saying specific CRE policies influenced their vote. The majority, 69%, said they voted for a candidate because their general economic policy seemed better. Tax policy and trustworthiness scored about the same level of importance, with both issues being selected by 52% of respondents. Participants were able to select multiple options to indicate the reasoning behind their vote.
When it comes to direct CRE impacts, Biden’s proposal to eliminate the 1031 exchange program is top of mind for the industry, with the largest group (32%) selecting it as the one policy that could have the biggest impact on CRE. Another 29% said changes to carried interest, probate taxes and other tax breaks that affect CRE could have the biggest impact.
Climate change and sustainability initiatives came in next at 14%, followed by infrastructure initiatives at 13%. Changes to the opportunity zone program received 6% of votes, while changes to housing policy only received 4%.
Feedback from survey respondents noted that future trade agreements under a Biden administration will also have an effect on the import of construction materials, which in turn will affect CRE. Some voiced concerns about the possibility of increased regulation, changes to energy policy and the possibility of more shutdowns to combat the pandemic.
Multiple respondents said that many of Biden’s policies have not been clearly outlined yet, leaving people uncertain about what the future will bring.
“He was not clear on virtually any policy proposals,” one participant said.
“There is enough doubt going forward and we need clarity not rhetoric," another participant wrote. "[It's] hard to plan where our company will be a year from now.”
Many respondents expressed concern about the impact of a Biden administration.
“There is no optimism, it’s the end of the United States of America,” one wrote.
The biggest positives cited were stability and predictability. Some respondents said Biden’s personality and approach to politics will mean less divisive rhetoric than Trump and will allow more room for moderate legislation to pass. That could result in better business outcomes, both on the domestic and international fronts, some survey participants said.
“I think the business world is better served by a leader who is predictable and not as erratic as the current president,” one respondent wrote.
“Lowering the temperature of political discourse and less demonization of those who merely disagree with you on a policy issue will do good to the country and will be good for business,” according to another.
Conservative respondents pointed out that left-leaning politicians and media outlets have demonized Republicans in a similar way over the past four years.
Other reasons given for optimism under Biden were stronger sustainability initiatives and a more thorough approach to ending the coronavirus pandemic.
Davenport Worldwide Development Group CEO Lance Davenport, whose real estate investment, acquisition and development firm is based in Atlanta, said that in order for the public to have the confidence to start traveling and be in shared spaces again, including CRE assets like office buildings and hotels, the spread of the coronavirus needs to be stopped.
“In my estimation, if we want to get back to our regular life, we have to deal with that, first and foremost,” Davenport said. “I think, just from the standpoint of the administration, the president-elect is being thoughtful about actively dealing with it to get us back to normal life.”
Several participants said that under a Biden presidency, the politically divided House and Senate will lead to gridlock, making it difficult for any legislation to pass. Half of respondents said that would be a good thing for CRE because it will help create balance and temper some more radical proposals.
“A divided government may not allow [Biden] to get aggressive policy initiatives across the finish line,” one respondent said.
“A balance with [a] Republican Senate will create checks and balances,” another said.
About 28% said it is not a good thing because it causes gridlock and prevents needed progress.
“We need bipartisan government, which depends upon the GOP; the Democrats seem to already be quite willing to engage in bipartisan policy making. Gridlock will be a huge problem for CRE,” another participant said.
The industry’s outlook on whether a stimulus package will be larger or more easily negotiated under a Biden presidency was almost evenly divided.
About 36% of survey respondents said they thought Biden’s election will lead to better or faster federal stimulus, while 32% said they thought stimulus negotiations will face greater gridlock under Biden or be less beneficial to CRE. Another 31% said they didn’t think there would be a significant change to stimulus negotiations.
N3 Real Estate President and CEO Brenna Wadleigh, who is based in Dallas-Fort Worth, told Bisnow that the Democratic Party has been holding up additional stimulus for the last three months and that a Biden presidency will only slow down the delivery of a package.
“Whatever our individual political views may be, there is no excuse for not having passed additional stimulus and unemployment benefits months ago. The Democrats used the additional stimulus as leverage to try to push their policy measures through instead of helping those who need it,” Wadleigh said.
“Now families and businesses who have waited three months already will likely have to wait another two months for the inauguration and the runoffs to happen.”
But Ken Weinstein, president of Philly Office Retail, said he is hopeful a stimulus package will be quicker to materialize under a Biden presidency.
“The first round of [the Paycheck Protection Program] and stimulus dollars was essential to my commercial and residential real estate tenants. They are not going to make it through this winter and the pandemic surge without another round,” said Weinstein, whose firm specializes in renovating vacant and deteriorated commercial and residential properties in the Philadelphia area.
“The final package will not be perfect, but it will be a whole lot better than the failed attempts at passing another stimulus package this past summer and fall.”
Now that the election has happened, some believe there is more political will to pass a stimulus package, but there are still concerns among CRE industry players that the package will not contain enough measures to help the sector.
“Stimulus packages will lean too much towards the individual and not provide all of the concessions necessary to support a quick rebound from CRE,” one respondent said.
Wadleigh said Congress has been dysfunctional for years and that it has failed to create and pass laws on critical issues like immigration reform, equal rights, tort reform, criminal justice reform, gun laws and climate change.
“Most Americans already agree or could agree on a compromise on these issues and pass it, but Congress refuses to perform its responsibilities and do so,” Wadleigh said.
“Therefore, the president, whoever it is, is forced to make law through executive orders and back channels, which causes division and strife where none needs to be. Term limits would help, but ultimately we as citizens must remember the role of Congress and demand that they function as our lawmaking body, or this division will never be overcome.”
Respondents expressed other worries about a Biden presidency, including his age — people who voted for him and people who didn’t cited it as a major concern — higher taxes and pressure on the new administration to move further left on policies across the board.
A move to socialism is weighing heavy on many respondents: There were 102 references to socialism in write-in comments.
“The socialists will destroy our country. Wake the F up!” one wrote.
Several people suggested that Biden could end up stepping down during his term for health reasons, resulting in Vice President-elect Kamala Harris assuming the role of president. Eighty-one respondents wrote in with concerns that Harris is too left-leaning.
“Pretty much every proposal [Biden] talks about is non-beneficial, and he will likely screw it up along the way. Kamala will step in with an even more radical plan,” one survey respondent said.
Overall, respondents didn’t indicate fear that the presidency would have a major effect on CRE. Forty-four percent said that they thought Biden’s presidency would have a moderate impact on the industry. Only 14% said they thought it would have a significant impact on the sector.
“No matter the rules, we will always find a way to make money,” one respondent wrote. "Stop complaining and start working."