Equity markets soared in the days following Donald Trump's election.¹ Wall Street wasted no time rallying behind the President-Elect’s promises of lower taxes and deregulation — giving major stock indexes their biggest single-day jump in over a year.²
Still, the election’s long-term impact on markets is an open question. Commercial real estate (CRE), generally uncorrelated with stocks and bonds,³ may react to entirely different factors than equity markets.
Our editorial team spoke with Sheldon Chang, head of CrowdStreet’s investment management and advisory services, about how the incoming administration could affect the next four years in CRE.
“In my view, the election inspired some cautious optimism among CRE investors,” Chang shared. “There seem to be some obvious tailwinds under Trump, but plenty of uncertainty too.⁴”
Acknowledging the Unknown
The President-Elect is widely seen as pro-business,⁵ and investor confidence could bring more capital into play.⁶ But it’s the details of his policies that might shape CRE performance.⁷ The administration’s approach to taxes, tariffs, and environmental regulations may be key.
“Trump’s pro-business stance is generally viewed as a tailwind, but we still don’t know the details of what’s to come,” Chang explained. “Tax cuts and tariffs seem to be expected, and we can somewhat speculate on their impact. Some other significant factors, like interest rates, are designed to operate independently of the President.”
Uncertainty is frequently a given in politics.⁸ Even the President-Elect’s top priorities, like tax cuts, need congressional approval.⁹ Still, there’s room for informed speculation on parts of his agenda that could possibly move forward.
Potential Tailwinds for CRE Under Trump
The first Trump term may offer some clues about how he could approach policymaking in his early days.¹⁰ The most obvious starting point is likely taxes, Chang said.
The 2017 Tax Cuts and Jobs Act (TCJA), which cut tax rates and expanded deductions for individuals and corporations, is set to expire in 2025.¹¹ Replacing or extending it is generally expected to be one of the administration’s first priorities, and members in Congress have already signaled their support.¹²
Generally speaking, the TCJA was widely seen as a tailwind for CRE, thanks to features like the pass-through income deduction, accelerated depreciation, and lower corporate tax rates.¹³ These policies generally may have increased the appeal of commercial real estate for many investors.¹⁴
“In my view, another important component of the TCJA was the Opportunity Zone program,” Chang shared.¹⁵ “It offered tax incentives for investments in designated underserved areas and sparked billions in CRE investment.¹⁶ We expect this to be extended under a second Trump term.”
In addition to tax incentives, the incoming president has shared plans to increase the supply of real estate.¹⁷
While zoning laws remain a local issue,¹⁸ beyond his direct control, he has pledged to open federal land for housing construction.¹⁹ In the past, Trump has also rolled back environmental protections to expand and expedite construction permits for both residential and commercial projects.²⁰
Increased supply can have mixed effects on CRE markets.²¹ Some investors believe the administration’s efforts to lower acquisition costs, when combined with tax incentives for developers, could make new construction deals more feasible.²²
What Uncertainties and Headwinds May Still Loom?
Interest rate policy is generally considered one of the biggest factors for alternative assets like CRE.²³ The President-Elect has said he doesn’t plan to replace Fed Chair Jerome Powell, who is in his second term.²⁴ Powell oversaw one of the fastest fiscal-tightening cycles in history but recently approved three interest rate cuts.²⁵ ²⁶
While Trump has promised lower rates, Fed policy is designed to be outside presidential control, leaving this an area of uncertainty for CRE investors.²⁷
Tariffs, on the other hand, are squarely within the president’s control, if certain statutory conditions are met — and they seem to be central to the new administration’s economic agenda.²⁸ The incoming president has indicated a 10-20 percent across-the-board tariff on imports to the United States, as well as a 60 percent tariff on imports from China.²⁹ ³⁰
“The impact of the proposed tariffs on CRE will depend on the details. We’ll have to see if, when, and how aggressively they are applied,” Chang explained. “Ultimately, it’s possible that tariffs drive up the cost of materials and increase construction expenses in the future.”³¹
This could represent a potential challenge for contractors and developers, who may face higher project costs. For CRE investors, these added costs could squeeze profit margins and make new developments less financially feasible.³²
CRE & The Bigger Picture
Many investors are keeping a close eye on Trump’s proposed policy agenda and its potential impact on markets in the years ahead. But as Chang points out, much of what shapes alternative asset performance tends to lie beyond the president’s control. Assuming that equity market swings may directly affect CRE has the potential to be misleading when viewed on their own.
For more of CrowdStreet’s insights, check out “Three Lessons as CRE Markets Shift.”
¹ https://www.reuters.com/markets/us/after-trump-win-investors-savor-red-sweep-possibilities-2024-11-08/
² https://www.nbcnews.com/business/markets/stocks-soar-decisive-trump-victory-rcna178921
³ https://www.us.jll.com/en/trends-and-insights/research/global/global-capital-outlook/cre-as-an-asset-class-the-long-term-attraction
⁴ https://www.oxfordeconomics.com/resource/the-impact-of-trumps-presidency-on-us-commercial-real-estate/
⁵ https://www.bloomberg.com/news/articles/2024-12-03/us-company-sentiment-jumps-on-trump-presidency-pro-business-rules
⁶ https://www.sciencedirect.com/science/article/abs/pii/S026499932200270X
⁷ https://www.oxfordeconomics.com/resource/the-impact-of-trumps-presidency-on-us-commercial-real-estate/
⁸ https://www.chicagobooth.edu/review/what-is-policy-uncertainty
⁹ https://www.cnbc.com/2024/11/11/trump-tax-cut-promises-gop-deficit-hawks-congress-debt.html
¹⁰ https://www.stinson.com/newsroom-publications-trumps-first-100-days-tax-trusts-and-estates
¹¹ https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-comparison-for-businesses
¹² https://www.cnbc.com/2024/11/11/trump-tax-cut-promises-gop-deficit-hawks-congress-debt.html
¹³ https://www.gtlaw.com/en/insights/2018/1/impact-of-the-tax-cuts-and-jobs-act-on-real-estate
¹⁴ https://mf.freddiemac.com/research/insight/20190426-tcja-report
¹⁵ https://www.naiop.org/research-and-publications/magazine/2024/summer-2024/advocacy/the-real-impact-of-opportunity-zones
¹⁶ https://eig.org/opportunity-zones-research-brief/
¹⁷ https://time.com/7176549/what-donald-trump-win-could-mean-for-housing/
¹⁸ https://www.npr.org/2024/02/17/1229867031/housing-shortage-zoning-reform-cities
¹⁹ https://www.youtube.com/watch?v=mZFjBFrYGhY
²⁰ https://www.nytimes.com/2020/07/15/climate/trump-environment-nepa.html
²¹ https://fsinvestments.com/fs-insights/chart-of-the-week-2024-6-28-easing-cre-supply-pressures/
²² https://www.matthews.com/central-impacts-of-trump-presidency-on-cre/
²³ https://www.ey.com/en_us/insights/real-estate-hospitality-construction/higher-interest-rates-and-the-impact-on-real-estate
²⁴ https://www.nytimes.com/2024/12/08/us/politics/trump-federal-reserve-jerome-powell.html
²⁵ https://www.statista.com/chart/28437/interest-rate-hikes-in-past-tightening-cycles/#:~:text=Between%20March%202022%20and%20July,the%20fastest%20in%20four%20decades
²⁶ https://www.cbsnews.com/news/fed-rate-cut-today-november-meeting-federal-reserve-announcement/
²⁷ https://www.nbcnews.com/politics/2024-election/trump-promised-lower-interest-rates-will-largely-control-rcna179285
²⁸ https://www.csis.org/analysis/making-tariffs-great-again-does-president-trump-have-legal-authority-implement-new-tariffs
²⁹ https://www.nytimes.com/2024/08/27/business/trump-tariffs-us-trade.html
³⁰ https://fortune.com/2024/09/27/how-trump-tariffs-china-imports-everything-else-would-work/
³¹ https://www.constructiondive.com/news/tariff-concerns-loom-construction-input-prices/732999/
³² https://www.bgsf.com/post/navigating-the-storm-the-impact-of-rising-construction-costs-on-commercial-real-estate-property-man
