111 510 510 libonline@riphah.edu.pk Contact

Commercial real estate industry worries over higher taxes as election looms

The US commercial real estate industry is pushing for tax relief and incentives championed by former Republican President Donald Trump to continue in the next administration, as the sector struggles with surging delinquencies, record vacancy rates, and elevated costs of financing.

Commercial real estate is especially vulnerable to higher taxes because its high fixed costs make it less able to offset them, according to industry trade groups. They said they are particularly concerned about key tax breaks being retained or left unchallenged in the coming years.

“‘Do no harm’ is the biggest thing with real estate organizations,” said David McCarthy, the managing director and head of legislative affairs at the Commercial Real Estate Finance Council, a nonpartisan trade group. “Given that the nature of real estate is not super liquid, anything that raises costs now would come at the worst possible time.”

Key measures that the industry is concerned about preserving include pass-through deductions, like-kind exchanges and low capital gains taxes. Trump has endorsed making his tax cuts permanent although he has not been specific about these measures. Many of his 2017 tax cuts are set to expire next year.

So far, campaign contributions from the finance, insurance and real estate sectors favor Trump, with $234.9 million donations to the former president versus the $117 million in giving to Vice President Kamala Harris, a Democrat, according to data from politics money tracker OpenSecrets.

Industry trade group the National Association of Realtors has also donated more to Republicans, with $5.2 million to the GOP versus $3.9 million to Democrats.

“Regardless of who is in office in January, we will be dealing with the tax cuts … expiring at the end of 2025, and we want to keep those,” said NAR director of commercial and policy oversight Erin Stackley.

The Harris and Trump campaigns did not respond to requests for comment.

Among the real estate mega donors who have backed Trump are budget hotelier Robert Bigelow’s Bigelow Aerospace which donated $14.2 million to Trump’s Super PAC, the OpenSecrets data shows.

Newmark Chairman Howard Lutnick’s investment firm, Cantor Fitzgerald, has given at least $6 million to the PAC. Lutnick co-chairs Trump’s transition team.

Mega donors tied to real estate who back Harris include Simon Property Group heiress Deborah Simon, who has donated at least $1 million, and Worthe Real Estate Group head Jeff Worthe, who has also given at least $1 million, OpenSecrets shows.

Bigelow, Lutnick and Simon declined to comment. Worthe said he supported being able to focus on “what’s good for business,” adding that he supported Harris because he wanted stability in Washington.

While some see signs of a market bottom, others argue that the commercial real estate (CRE) industry needs time to recover from high interest rates and work-from-home trends. Next year, it will face $1 trillion wall of debt, a surge in office sector delinquencies on commercial mortgage-backed securities to 11% and record-high office vacancies in urban centers, according to ratings agency reports. Falling interest rates may offer scant relief.

“Over the last 18 months … operating costs have … risen dramatically at the same time the availability of capital and credit have diminished,” said Jeff DeBoer, CEO of the Real Estate Roundtable, an invitation-only group whose members include Blackstone, Brookfield Property Partners and Starwood Capital Group. “All of that creates stress and challenges in the CRE marketplace.

Michelle Conlin, "Commercial real estate industry worries over higher taxes as election looms," Business recorder. 2024-10-29.
Keywords: Economics , Tax relief , Trade groups , Legislative affairs , Incentives , Investment , Donald Trump , Kamala Harris , US , GoP , CRE , PAC

Leave a Reply

Your email address will not be published. Required fields are marked *