Senior Research Analyst Bethany Schneider

WASHINGTON, DC—The biggest understatement of, well, ever, is that the stakes riding on the outcome of this US presidential election are extraordinarily high. The divisions between the two candidates' positions could not be more stark on every issue of note, from foreign policy to US economic policy, immigration, terrorism and, obviously given that the Republican nominee is Donald Trump, real estate investment.

There is one market, though, that can safely shrug off the hand-wringing surrounding this election: the Washington DC area's office leasing market. Come Wednesday, Nov. 9th and in the weeks and months beyond, leasing activity in the region will remain the same whether Hillary Clinton wins the White House or Trump.

So says Newmark Grubb Knight Frank in a white paper authored by Senior Managing Director of Market Research Greg Leisch and Senior Research Analyst Bethany Schneider.

Leisch and Schneider took on that oldest of Washington DC real estate axioms -- namely that when a Republican wins the White House, office leasing in Northern Virginia improves because of its defense orientation and when a Democrat wins, suburban Maryland gains because of its strong biotech and life sciences clusters. And of course, arguments are made on both sides of the political spectrum that their party generates greater activity in the District in general.

The fact is, Leisch tells GlobeSt.com, “neither party has demonstrated a clear causal link to greater office occupancy.”

The report dug through 36 years of office leasing trends to come to this conclusions. There is one final axiom, though, that Leisch and Schneider weren't able to debunk: that office space demand is stronger when the White House and Congress are of the same party. The reasoning is that since it requires the support of both Congress and the White House to pass major legislation, single-party control is most likely to lead to increased office space demand as major spending packages get passed. But, the report found, in the 36 years since 1980, there were only eight years, or four sessions of Congress, in which the federal government was under single-party control — not a large enough sample size to validate this theory.

What's An Investor To Do?

While the report is likely to interest political scientists, the group that should really be paying attention are office investors, tenants and landlords, Schneider told GlobeSt.com.

Investors have been known to delay decisions to see which party assumes control of the White House, she said. Indeed right now market participants have been reporting that the number of investors bidding in office sales has been dropping. Much of that has to do with where the Washington DC area is in the investment cycle at the moment, but there is also an element of "White House watch" going on as well, Leisch said.

Likewise office tenants, Schneider adds. There are signs that some are waiting to see how the election goes before they pull the trigger on new space. While a case can be made that dragging out negotiations can improve their position in what is still a tenant's market, basing this decision on the upcoming election is just foolish.

Politics Matter, Parties Don't

None of this is to say that politics do not matter to Washington DC's commercial real estate market. On the contrary it matters greatly: just consider the 3 million square feet of space the GSA has returned to the market under its “freeze the footprint” initiative.

Or the hundreds of thousands of square feet that an expanded federal government needed in the wake of the terrorist attacks on Sept. 11.

'Ah ha', political junkies are saying right now -- so the presidential elections do matter when it comes to real estate!

Not quite, Schneider said. It is impossible to say how an administration from the losing party would have handled those triggering events -- that is, the recession and the terrorist attacks. The events themselves were the drivers of changes in space needs -- not the party that won the White House.

The bottom line, she said. "Just keep your eye on the economy and global events. That is the best indicator for predicting Washington DC's office space."

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The US Presidential Election Will Affect Everything Except This

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