As the presidential candidates debate everything from the war in Iraq to the bailout on Wall Street, the region’s commercial real estate experts ponder whether the market gets a post-election bump in the fourth quarter.
Two out of three respondents in a new DLA Piper survey of commercial real estate executives think that Republican nominee John McCain, if elected, would have a more favorable impact on the commercial real estate industry than Democratic nominee Barack Obama.
Party politics aside, commercial real estate executives want certainty, and regardless of the election result, that will provide greater certainty for investors contemplating the policy stances of the White House, Senate and House of Representatives.
Perception becomes reality in the commercial real estate market, said Jack McCabe, founder of McCabe Research & Consulting, a commercial real estate research and consultancy in Deerfield Beach.
“If Obama is elected, people are going to perceive changes ahead. While change is uncertain, in these times change can only be better,” McCabe said. “Obama may create a more positive mentality in the commercial real estate industry.”
Either way, McCabe said, if the election generates enough optimism in the marketplace to prompt the closure of large, well-publicized right away, that determining factor could be enough to kick start the market. Until then, bad economic news — job losses, corporate bankruptcies and unoccupied buildings – will inhibit activity.
John Bell, managing director of DTZ Rockwood Miami, doesn’t think it matters who gets elected to the White House in November. His point: Election years bring a sense of uncertainty to the commercial real estate markets – and the capital markets abhor uncertainty.
“Historically, commercial real estate, regardless of who is elected, usually has a strong year post-election,” Bell said. “Ultimately, the commander in chief doesn’t have much say over the economic plans. But people still like certainty.”
Bill Holly agrees: investors like clarity and certainty – and the candidate that can provide that will help the market.
“Typically, investors are jittery before elections because of the unknown and Americans are usually optimistic after an election. This year is anyone’s guess. We’re in uncharted waters hoping we can get by without hitting a reef,” said Holly, principal of Holly Real Estate/TCN Worldwide, an integrated commercial real estate company in Miami.
With Florida already in a statewide recession that will be compounded by a national slump, the elections may not make the same impact that Bell and others have witnessed in past cycles.
“We have a major crisis going on in our financial markets right now. How that’s resolved is going to have a lot more to do with the near-term future of commercial real estate than who’s elected president,” said Dana Johnson, chief cconomist with Comerica Bank, a financial services company headquartered in Dallas.
The overwhelming majority of industry executives have concluded that the markets will not improve in 2009, according to the DLA Piper survey.
The majority of respondents (62 percent) don’t expect real estate markets to stabilize until 2010 and 22 percent don’t expect to see stabilization until 2011. That would be just 12 months before the next presidential election.
Despite the doom and gloom, Johnson, who toured South Florida this week to offer business and community leaders with insights into the local and national economy, is still bullish about the short-term.
“The crisis will probably be resolved in some shape or form by the time we get to the new president,” Johnson said. “But I just can’t, in my own mind, think productively about the new administration and how that might affect things. It’s in the hands of the Fed and the Treasury.”