Marcus & Millichap

Trump Election: Investor Implications

Special Research Report

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Trump Victory to Push Economy From Status Quo,
Could Redefine Playing Field for Commercial Real Estate

Following the lengthy campaign, Donald Trump surprised pundits and pollsters by winning the presidential election. This unanticipated turn of events set off a rapid drop in both stock market and Treasury rate futures before they recovered early Wednesday morning. In the wake of this unexpected outcome, markets are repricing both debt and equity to factor in increased government infrastructure and defense spending as well as the prospects of higher inflation. Sentiment is fragile and volatility should be expected.

The U.S. economy now stands in its seventh year of a durable but moderate expansion, supporting job creation, wage growth and consumption. Stable 5 percent unemployment and 5.5 million unfilled job openings point to a tight labor market and prospects of 2.0-2.5 million new jobs over the next year. Barring a significant unanticipated event, these positive drivers will be sustained into the coming year, supporting commercial real estate demand, tight vacancies and sturdy rent growth.

Though changes will undoubtedly emerge, economic momentum and positive demographics should sustain healthy real estate fundamentals. These prospects are bolstered by the coming reduction of gridlock on Capitol Hill as both houses of Congress and the White House come under a single party. This will support the establishment of fiscal policy, including a new budget and an increase of the debt ceiling when needed. In addition, the potential of reduced taxes, increased infrastructure spending and deregulation could give the economy a boost over the short term. While more rapid economic growth could spark inflationary pressure and push interest rates higher, the acceleration could also generate more jobs and stronger wage growth, both positives for the commercial real estate sector.

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