|Capital Gains Taxes, Healthcare Reform Also Could Have Significant Real Estate Implications in Obama Second TermFlorida, November 20, 2012– Resolution of the so-called “fiscal cliff,” a potential increase in the capital gains tax and full implementation of health care reform are some of the pending public policy issues with significant implications for commercial real estate, according to CBRE Global Chief Economist Ray Torto and Head of Americas Research Asieh Mansour.“While the results of the U.S. elections brought some clarity about who the key players in Washington, D.C. will be next year, uncertainty over policy outcomes – and their effect on the general economy – remains,” said Dr. Torto.
In a new edition of Watch This Space (click HERE), CBRE video series which looks at the major trends affecting commercial real estate, Dr. Torto and Ms. Mansour noted:
• While the post-election tone in Washington D.C. has apparently become more conciliatory there is not a clear path to comprise. Overall investors remain risk-averse, and will continue to focus most heavily on the best buildings in primary markets. Longer term, if there is a comprehensive resolution to the fiscal cliff, there will be positive implications for the leasing market in commercial real estate.
• Commercial real estate will be attractive over the next few years with returns expected to be in the high single digits. In a slowly recovering economy, with little new supply of competitive space, the driver of these returns will be income growth, rather than appreciation.
• Both public and private sector employers are accelerating their efforts to reduce real estate costs. Increasingly work is being seen as something you do, rather than a place you go to, as employers embrace mobile regimes.
• Any increase in capital gains taxes could potentially lead to lower real estate values over time. However, if there is an increase in the capital gains tax, such an increase would likely be on all types of investments. Depending on how change was structured, commercial real estate could potentially be a more attractive investment compared with stocks and bonds.
• The full implementation of federal health care reform should lead to a pick-up in medical-related real estate development and increased construction of community hospitals, and retail-type ambulatory care centers. At the same time, the health care law will likely increase employers’ labor costs when hiring full-time employees. This may dampen the hiring of full-time employees at a time when employment growth is already weak, and slow the improvement of underlying real estate fundamentals, which are driven primarily by job gains.
CBRE’s Watch This Space video program delivers authoritative comment on the issues and news in the global commercial real estate industry. The videos take a look at the major trends affecting the sector, with expert commentary from CBRE and industry professionals.
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