Study: Washington CRE Fares Better Under GOP Rule

WASHINGTON, DC—The commercial real estate initiatives of this city and the surrounding area, not the political entity otherwise known as the Nation's Capital, seems to fare better when Republicans control both sides of Congress. That is the eyebrow-raising conclusion of a CBRE study—a finding that surprised the report authors as well. "We weren't expecting the numbers to be so lopsided," says Marianne Swearingen, a research manager at CBRE's local office.

CBRE found that over the past 20 years, when Republicans were in control of both sides of Congress, there was 78.5 million square feet of existing and new construction absorbed, or 7.8 million, on average, in every year they were in control. When the Democrats controlled Congress, some 17.9 million square feet, or 2.5 million annually, on average, was absorbed. When Congress was divided, those numbers clocked in at 515,049 and 128,762 square feet per year.

Of course, background events play a huge role in these numbers—and these events are not necessarily seen as good for the industry when they happen. For instance, Swearingen points out that in the 1990s, when Republicans were in control of Congress for much of the Clinton Administration, the federal government was dramatically downsized— which turned out to be a very good thing for the local real estate market.

"A lot of those federal employees were turned into government contractors and that growth gave rise to such markets as Crystal City," Swearingen says. Also, during the mid-2000s, there was the creation of the Department of Homeland Security and two wars fought in Iraq and Afghanistan, both of which helped the local commercial real estate market. The past 15 months—a period when Congress has not only been divided, but bitterly so—have been the worst for the area since 1992.

But overall, the industry's clear orientation to the Republican party is hardly a surprise. The ways in which CRE views its key issues—the tax characterization of carried interest and taxes in general; development policies and priorities; financial regulations, or lack thereof, to name a few—tend to align with how the Republican Party views them as well. In a recent poll, GlobeSt.com asked its readers which US presidential candidate would be safest for their business. By a hefty margin, 64% of the 930 respondents chose the expected Republican nominee, Mitt Romney.

David Johnson, principal of the political and PR consultancy Strategic Vision, says just as important to voters is the rhetoric from politicians. "It is one thing to hear protesters, such as the Occupy movement, deride businesses and financiers," he says. "It's quite another when that same vocabulary comes out of the mouths of politicians. It's not that Democrats have been particularly outspoken in anti-business sentiment, but the perception is there."