Deciphering the Presidential Inauguration’s Impact on CRE; To be Continued

This week, as we celebrate Dr. King’s legacy alongside the inauguration of a new presidential administration, it’s a natural moment for reflection. From national headlines to challenges such as geopolitical tensions, wildfires, and other strife, we find ourselves at a crossroads, or, to borrow a phrase from storytelling, a moment “to be continued…”

Last week, I was very fortunate to spend some time in Austin, a city steeped in American history. Regardless of where you look, from Huston-Tillotson University to Cesar Chavez, from Lady Bird Lake to the Gigafactory, the city is seemingly purpose-built to present the American story as a tale of struggle and triumph alike. It was in this environment that I was reminded of some of the critical lessons from past administrations, particularly that of President Lyndon Baines Johnson whose influence permeates the city. Reflecting on those lessons can offer a valuable lens to anticipate the potential impacts of President Trump’s policies on the commercial real estate market.

Visiting President Johnson’s Presidential Library left me profoundly moved by the period of transition his administration oversaw. From the national loss of innocence with JFK’s assassination to the hope and fears driving the space race, from the grappling with Federal oversight versus local control in education, peacekeeping, and states’ rights to the strivings and stutter-starts both for and in opposition to Civil Rights, military abuses, and the threat of rising violent socialism, LBJ’s administration was at once a ship in the bottle of the most formative period of recent American history, and also a canary in the coal mine for the strivings of the American story since then.

To take away lessons from such a period can simultaneously seem both overwrought as well as incomplete, but reflecting on that era in the light of where this American project may be headed, especially as it may affect the commercial real estate market, seems like a worthwhile task.

My main takeaway from LBJ’s administration – look for a president’s passions and watch there for a related action.

LBJ came from a working-class farming home and was a schoolteacher and principal for many years before he was involved in politics. Almost immediately, he began to work on civil rights issues and national education reform, and he was instrumental in the creation of the elementary and secondary school systems as well as the higher-ed student loan structure that we take for granted today. Throughout his term, his personal passions drove his administration’s overarching goals.

President Trump is driven somewhat differently, but a few passions of his are clear. Let’s take a look at some of the identifiable passions and the possible ramifications affecting commercial real estate.

Passion: He has always displayed a commitment to free expression and calls censorship or misrepresentation in media as deeply unfair. This attitude likely extends to any perceived removal of “property rights” such as onerous regulation.

Action: Doubling down of free speech protections and a gutting of so-called “hate speech” laws. In real estate, expect a softening of requirements on buildings and landlords such as the ADA and even some fair housing regulation reform.

Passion: He’s skeptical of big government, especially institutions like the IRS and the 3-letter agencies.

Action: Efforts focused on shrinking the federal government and any state entities that rely on federal funding, making government generally more efficient, tech-enabled, and removal of burdensome regulation. As the federal and state governments are large users/occupiers of real estate, it’s possible such shrinking could create a new supply of available office and industrial properties in some submarkets. Also, should the IRS see its mandate and it’s ability to perform essential duties change, this could result in a major beneficial realignments for investors and other commercial real estate market participants.

Passion: He has consistently utilized law and the court system to allow his businesses to win.

Action: Seek ways to enable the citizenry to sue municipalities, states, and the federal government for blocking or reducing property rights or civil rights. The real estate industry should be one of the beneficiaries of this as property holders can defend any notions of “taking” more directly.

Passion: He seeks to get along with everyone that can benefit him and coldly shuts out those who stonewall.

Action: Forge unexpected or unlikely alliances that align with the administration’s goals with a likely lack of consideration for historical alliances that no longer directly benefit the US. To the extent foreign investment affects commercial real estate, it’s foreseeable that such investment may become more challenged from some foreign countries (i.e. China, Canada, Mexico).

Passion: Americans First

Action: Birthright citizenship and net immigration will slow. In addition to the likely slowing of demand on all real estate asset classes as fewer folks will demand apartments/homes and employment. To the extent this results in higher labor costs and if those are passed on to businesses and consumers, operating statements may suffer below the line and asset values may slowly erode.

Passion: Property rights are civil rights

Action: Easing of environmental regulation and other regulations that stymie development, align incentives by withholding funding from municipalities who stand athwart to development and human flourishing, and look for property insurance reform at the federal level. It is markedly less likely that any IRS reforms such as deeper auditing of investors, or capital gains treatment, or 1031 exchange reform is going to be a focus of this administration.

In Summary

As we look ahead to the impact of President Trump’s administration on the commercial real estate market, history reminds us that leadership priorities and personal passions often translate into defining policy actions. Just as LBJ’s educational background and working-class roots shaped his transformative reforms, President Trump’s business and legal experiences, along with his commitment to deregulation and prioritizing American interests, are likely to influence the landscape of commercial real estate. While the potential actions outlined here offer a glimpse into what may lie ahead, the unpredictable nature of governance reminds us to stay adaptable and proactive.

Ultimately, this intersection of policy, passion, and market dynamics underscores the importance of vigilance, strategy, and innovation in navigating the future of the commercial real estate industry. Our business, like the greater nation as a whole, indeed seems ready “to be continued.”