In recent weeks, I have had three distinctly different conversations with three of my corporate clients about their space and the potential effects of the upcoming election. One is largely dependent on revenue from government contracts, one benefits more from a free-market, capitalist-driven economy, and one who gets revenue from both sides.
I would venture to say tenant representatives all over the United States are hearing much the same thing:
• Uncertainty. Remove the uncertainty of who will be president and control (or not) of both the senate and congress … before I make any long-term decisions. I’ve been hearing that one for 24 months! But much more so as of late.
• Obama Win. Funding for social programs grows, and we commit to more space and longer terms. Healthcare, education … even insurers.
• Romney Win. Clarify some of the Dodd Frank rules, Wall Street regulatory environment, and we will “take off.” Companies will require more space and make longer-term commitments, including most private companies, oil/gas, finance … and insurers.
It’s interesting to me to participate in these discussions, even if only as a third-party service provider who will eventually be asked to execute some sort of space/occupancy strategy.
In the end, the health of the overall commercial real estate marketplace is based upon space being leased to good credit tenants—and the longer the term, the better, from a valuation point of view. Stability for lenders underwriting, more efficient approval of lease terms/economics for both landlords and tenants, fewer defaults for either side, capex decision making, and a generally clearer path.
An interesting note I see over and over in the media is this one: Fifty-five percent of voters not affiliated with either party consider the presidential choice a matter of “voting for the lesser of two evils.” The observation from experts is that these swing voters will possibly decide a close race, and these voters don’t really care to understand the differences between the two “bad choices. So where does that put us? And isn’t it wild to think all of our real estate industry could be greatly affected by these largely frustrated but unaware U.S. citizens?
As senior vice president of UGL Services, Jim Lob co-manages the firm’s brokerage operations in Dallas. He specializes in large corporate headquarters relocations and build-to-suit projects. Contact him at [email protected].
