Many in the real estate industry look back fondly on Donald Trump’s first administration, including big corporate tax cuts and a developer-friendly tax incentive to induce investment in low-income areas.

Trump’s second presidency could see a renewal of his signature tax cuts. He’s pledged to reduce regulations, and the billionaire real estate mogul campaigned on opening federal lands for housing development.

But some of Trump’s proposals also could exacerbate inflation and increase construction and financing costs and bring uncertainty to an industry that is often averse to it. Trump’s reported plans to get rid of tax credits for electric vehicles could hurt the automotive transition to electrification, a major driver of growth in manufacturing employment and industrial real estate in some states, such as Georgia.

“There’s definitely going to be some pros and some cons,” said Lonnie Hendry, chief product officer at data firm Trepp. “We’ve kind of hit a point where we feel like (interest) rates have stabilized and people know what’s going to happen, but now you insert Trump into the equation. That’s a new variable.”

Commercial real estate comprises most development types outside of single-family homes. From high-rise offices to strip malls to warehouses, the industry’s scope is far-reaching. Commercial properties are also critical to the tax bases of cities, counties and school districts.

The Great Recession of 2007 to 2009, triggered by the housing bust, walloped commercial real estate. The market steadily recovered through the 2010s, but took another blow from COVID-19 in 2020, during the last full year of Trump’s first term, with hotels and offices hit hard.

Kevin Thorpe, chief economist for real estate services firm Cushman & Wakefield, said those boom and bust cycles took place under the political leadership of both Democrats and Republicans.

“Property has proven that it can perform well, and sometimes not well, regardless of the political landscape,” he said on social media the day after Trump’s win.

Trump, whose real estate career has gone through its own ups and downs, has promised a slate of policies he says will supercharge America’s economy.

Trump’s promise to enact tariffs on goods could increase construction costs. Promised mass deportations could make construction labor more expensive. Most economists say both would worsen inflation, something voters ranked among their top concerns going into this year’s elections.

‘Strong momentum’

The late 2010s brought a new wave of construction in areas like Atlanta's Midtown, which saw its skyline remade by glitzy offices and luxury residential towers.

Interest rates were at historic lows, construction costs were cheap and new offices, apartments and hotels were in high demand. Lynn McKee, director of Georgia State University’s commercial real estate master’s program, said nothing keeps real estate executives up at night like unexpected change.

“Businesspeople like stability,” McKee said. “They want to know something’s going to stay the same and not going to change. If something changes, then you’ve got to change your model.”

The COVID-19 pandemic upended that model in ways companies are still trying to rectify.

Many white collar workers have gotten used to remote or hybrid work. Inflation roiled the U.S. and the rest of the developed world, raising construction and labor costs. The Federal Reserve subsequently hiked interest rates to tame inflation, avoiding an anticipated recession but increasing the debt burden for commercial property owners.

Despite those challenges, commercial real estate experienced a softer landing than after the Great Recession. At least so far. And the Fed has cut interest rates twice — and signaled it could again in December.

“All the data sort of suggests that better days lie ahead for property,” said Cushman & Wakefield’s Thorpe. “And if history is any guide, the new political landscape is not likely to fundamentally impact the strong momentum that is already forming.”

Brad Sinclair, a principal and managing director over capital markets and hospitality at real estate services firm Avison Young, said many brokers and companies were waiting for the election’s conclusion before taking action at the end of the year, typically a busy time for real estate deals. He said the decisiveness of Trump’s victory took one unknown off the table.

“Now that the (election) conversation is over, everybody’s focused back on trying to get deals done,” he said.

Which levers to pull

Trump’s return to the Oval Office in January could result in immediate changes that would ripple throughout the economy.

He’s promised to raise tariffs — a tax on imports — both on America’s allies and enemies as a way to bolster domestic manufacturing. Presidents can implement tariffs via executive order, meaning Trump won’t need to clear the time-consuming hurdle of congressional approval.

Tariff hikes can incentivize American-made goods. But they also risk increasing inflation because importers often pass on the cost to domestic consumers, which Trepp’s Hendry said could influence whether the Fed continues to cut interest rates.

“What the Fed would want to avoid doing is lowering rates between now and January, and then sometime during the first half of 2025, they have to raise the rate again,” he said.

Trump has also promised “massive deportations” of undocumented immigrants, another plan that could be initiated by executive order. McKee said it could exacerbate labor shortages in fields like construction, which could drive up prices.

Another area where the president could directly impact the office market is the federal workforce.

Since the pandemic, many federal offices have turned into ghost towns. Richard Barkham, global chief economist for CBRE, said Trump could order federal workers to return to the office five days a week. While that could boost office occupancy in cities with large federal workforces, Trump has also promised to fire scores of federal employees to cut costs, which could offset those impacts.

Many other economic policies, such as extending corporate tax cuts or cutting regulations, would need to go through Congress, a realistic endeavor since Republicans were elected to majorities in both chambers. Most real estate experts said those would likely benefit large companies, including those that occupy office space or those who are office landlords and developers.

Still to be seen is what impact Georgia might feel if Trump follows through on reported efforts to kill EV tax credits enacted under President Joe Biden. Automotive manufacturers have rushed to build EV and battery plants in Georgia and other states counting on the credits to help entice buyers.

Hyundai recently opened its $7.6 billion EV plant near Savannah and a number of suppliers are opening nearby.

Tomasz Piskorski, a finance professor at Columbia University’s business school, said Trump will have several policy levers at his disposal once he’s back in power. How he prioritizes and uses those will determine how quickly the economy — and the broader commercial real estate industry — will feel the impacts of his second term.

“There is a regulation lever, a cutting-spending lever and a monetary policy lever. Each has its own costs and benefits,” Piskorski said. “I think in the first three to six months (of Trump’s second term), we’ll have clarity on which one he will decide to push more.”

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