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Trump tax reform uncertainty strikes commercial real estate

On Behalf of | May 22, 2017 | Commercial Real Estate |

Commercial property developers in California may now be thinking twice before starting projects that would have been carried out without hesitation a few years ago. Potentially huge changes on the horizon, including tax reform and inflation, are uncertain and likely to have serious implications in the debt-heavy world of commercial real estate financing. A look at the market in New York offers insights into why some investors are moving ahead despite the uncertainty and others are choosing to forego profits and play it safe.

Brokerage data showed a Q1 2017 drop of 58 percent in sales compared to the same quarter last year. When averaged across the nation, property sales experienced a drop of 18 percent. One real estate advisor suggests that the frenzied pace of overbuilding during the past six years of bull mania in major markets has caused commercial property developers to pause and wonder how long this could continue. Other investors claim the slowdown is more about concerns over whether President Trump’s tax reforms will fail to pass Congress.

Some developers claim that the slowdown in the commercial real estate market is simply a return to normal after six years of frenzied building. In response, some investors are re-purposing projects to reduce their debt burdens.

An overall slowdown in developments can signal broad market woes, but commercial property developers don’t have to cut themselves off from future revenue streams. Changes in the retail world might provide an opportunity to shift investments out of retail and other ailing sub-sectors. An attorney experienced in real estate law may be able to help developers and investors protect their bull market gains from future financial difficulties and take advantage of new options in the Orange County market.