AFIRE, the association for international real estate investors in U.S. CRE, has released its annual survey. When asked what political or regulatory trends the greatest impact on cross-border investment trends in the coming year would have, 25% said tax and deregulation, 23% said geopolitics; 20% said trade; and 10%, economics.
Some of the smallest expected factors were interest rates (7%), housing (5%), immigration (5%), and other (5%).
There was a relatively sharp negative reaction to the U.S. elections, as 40% of respondents thought that a Republican sweep of Congress and the White House would be the “most detrimental” to cross-border investment in the U.S. The least detrimental was a Republican Senate, a Democratic House, and a Kamala Harris presidency. The most beneficial to cross-border investment in the U.S. was considered to be a Democratic Senate and House with Harris taking the Oval Office.
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According to AFIRE, the reactions seem likely a response to concerns about some projections of effects that Trump’s plans might have on the trade balance (up just over 5% to more than 7%), inflation (jumping to at least 4% again and possibly as high as 7%), and GDP (falling roughly 3% to as much as a 10% drop by the last year of Trump’s administration). Meanwhile, AFIRE did caution that the “severity" of the negative effects … depends on the international response to new U.S. policy.)
Some U.S. macroeconomic trends were seen as beneficial. “Interest rates are going down and that’s a positive impact on the denominator for us [foreign capital],” said one respondent. “I see our allocation going back to normal levels regardless of the election outcome.”
The majority of respondents agreed with the statement that housing affordability and availability will be the most important issue in U.S. CRE over the next five years. The figure was 57% in March and is now up to 63%, while those with no opinion dropped from 18% to 4%. Respondents agreed that the best development approach would be to prioritize affordable housing, whether multifamily or single-family.
When looking at how public policy might help housing, respondents strongly leaned toward municipal solutions in the first (housing policy reform), second (more efficient zoning), and fourth (reduced land use restrictions). The third was at the federal level and interest rate cuts. The fifth was public programs.
When asked about whether there might be a silver bullet solution, 34% said zoning reforms, 24% said other solutions, and 21% each said incentives and financing. As one respondent said, “The housing crisis is not a problem the commercial real estate industry can solve alone. It’s going to take a lot more partnerships between public, private, and philanthropic entities. Between us, the government, and philanthropic capital, we need to address this problem at the local level.”
Insurance was another area of concern. When asked if the industry was appropriately pricing climate risk, 71% disagreed in the first quarter and in this latest round, 80% disagreed.
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