John Alvarado: Clarity on the Horizon?

John Alvarado

Currently, the biggest detractor of value in commercial real estate is uncertainty. Think about it this way: If you have a building with a 10-year lease to a high-credit tenant, you know almost to the beep (slang for basis point) what that asset is worth and that there’s a deep pool of buyers that would pay handsomely for that cash-flow stream. If, on the other hand, you own an asset that has two years remaining on its major tenant’s lease, what is that asset worth? That’s a much more difficult question to answer.

A parallel comparison can probably be made about the effect of the election. What will be the capital gains tax policy? How will fiscal policy affect interest rates? Will there be stimulus tactics that fundamentally change the attractiveness of real estate as an investment?

Each candidate offers vastly different paths; therefore, right now, there is no clarity in the market. One way or another, there will be clarity after Nov. 7—and that will be welcome news. We have seen great improvement in the capital markets, with interest rates at an all-time low. However, sales volume is down nationally approximately 10 percent.

My sense is that once the election is over, we will have a clearer path to a more robust sales environment. And that’s good news for everyone.


  • Jack

    The election is an excuse not a reason for the lack of clarity. Both the House and the Senate will remain largely unchanged and they are the ones who truly pass policy (the president can approve or veto but the bill is proposed and passed by the legislative branch) Clarity will come when the Fed returns to sanity and raises interest rates and stops monetary easing . Then and only then will investors have a clearer picture of what the future holds