Study: Investor Worries About Federal Policies, Gridlock Temper Bullish CRE Outlook

Akerman Report Reveal ‘Mixture of Hopefulness and Anxiety’ As Markets Await Trump Administration Propositions on Deregulation, Tax Reform

Significant steps announced Friday by President Donald Trump to roll back Dodd-Frank regulations and reveal a “huge” tax reform package next week are clearly manna from paradise for CRE financiers and lenders, with nearly two-thirds of the executives surveyed by national law firm Akerman LLP believing Trump’s pro-business policies will have a favorable impact on the realty industry this year.

Yet, as the very same study reveals, it’s complicated. Akerman’s 2017 U.S. Realty Sector Report, which captured the sentiments of 200 leading realty executives in interviews prior to and after the 2016 governmental election, “shows a mix of hopefulness and anxiety for real estate potential customers in 2017,” the report states.

About 53% percent of respondents were more positive about the 2017 CRE outlook for the U.S. commercial real estate market, compared to 38% in 2015. However, 85% are concerned about either the effects of unintentional effects of Trump policy modifications, uncertainty about the economy, or potential effects from rising rates of interest.

Before the election, 27% of respondents asked to rank the most considerable elements impacting the property sector pointed out “uncertainty in financial conditions” while 24% discussed “federal gridlock and uncertainty of federal government policy.” Another 14% cited uncertainty over rate of interest.

Those elements far outranked market-specific issues, with just 12% pointing out rising acquisition prices or declining capitalization rates and 9% worried institutional credit schedule.

Inquired about their main reason for uncertainty in the U.S. realty market, 35% of participants cited ongoing government gridlock and policy uncertainly, with 31% and 20% mentioning uncertainty about economic conditions and rate of interest, respectively.

The report’s authors put it another way: 67% of Akerman study participants “were considerably worried, at its broadest circumference, about unpredictabilities created by the crossway of federal government-level policy making or the lack thereof, and the effect of these actions/inactions upon the economy.”

“Late January brought into the executive branch of U.S. government a pro-business, pro-growth, tax-averse property designer,” the report states. “But discerning exactly what comes next has actually been difficult.”

“The first 100 days of the Trump administration have actually provided a cautionary picture of business world, which has the tendency to yearn for, among all things, a predictable hand at the tiller.”

President Trump on Friday transferred to provide an action plan advancing tax reform and financial market deregulation, the CRE market’s 2 top legal top priorities. The White Home might release a formal tax reform bundle as early as Wednesday, and the president signed an executive order and memos empowering Treasury Secretary Steven Mnuchin to assess actions had to streamline the tax code and to rescind burdensome provisions of the Dodd-Frank regulations, legislation adopted in the wake of the monetary crisis.

With a Republican president and GOP-controlled Congress, federal gridlock may not be the issue it when was– or, the outgoing issues of one administration may be exchanged for new, incoming unpredictabilities, Akerman stated.

“We’re all believing it’s most likely going to agree with genuine estate,” said Richard Bezold, chair of Akerman’s Realty Practice Group, concerning service conditions this year under the Trump administration.

That stated, the business neighborhood is waiting to see what changes will really come, and forecasting what a new president will provide for the economy resembles “attempting to anticipate the unforeseeable,” Bezold acknowledged. On balance, nevertheless, industry executives are increasingly bullish about the state of the CRE market and the Trump impact as 2017 unfolds.

“There are headwinds, however as we move into a decontrolled environment, we anticipate less-restrained capital to pursue chances actively and strongly,” Bezold added.

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