The 2024 election cycle concluded this week, with Donald J. Trump elected as President of the United States. The Roundtable congratulated the President-elect and the newly elected members of Congress. As the nation transitions to new leadership, The Roundtable is looking forward to collaborating with the new administration and Congress on policies critical to the economy, jobs, housing, and the health of real estate markets.

Election Results

• At the time the election was called, President-elect Trump had received 295 electoral votes compared to Vice President Harris’ 226. Trump also took the lead in the popular vote, with 72,773,748 votes compared to Harris’ 68,123,125. (The New York Times, Nov. 7)

• On the Congressional front, the Republican party took control of the Senate with 53 seats. Neither party has reached the necessary 218 seats to secure a majority in the House, but Republicans are in the lead with 211 seats. (AP News, Nov. 7)

Focused Hard Work Ahead Regarding Tax Legislation, Deregulation, and Housing Policy Shifts

• Donald Trump's victory in the presidential election, Republicans' victory in the Senate, and the likely Republican House majority dramatically reshuffle the dynamics for policy debates on key issues related to real estate. The Roundtable’s initial thoughts on how the election results impact our priorities, strategy and outlook include:

• Tax Policy Extensions and New Proposals: The incoming administration is expected to extend 2017 tax cuts, restore bonus depreciation, and support Opportunity Zone incentives. New pro-growth tax measures could also gain traction.

• Deregulation in Energy and Financial Services: Deregulatory shifts may impact climate and financial services regulations, prioritizing oil and gas development, easing bank regulatory and SEC, HUD, and FHFA oversight. Federal rollbacks could increase regulatory challenges across states as they implement varying climate standards. Ensuring grid reliability could become an even more prominent issue in the energy policy arena.

• Focus on Credit Markets and Housing: Anticipated policy objectives include reducing mortgage rates, revisiting Fannie Mae and Freddie Mac conservatorship, and reducing housing costs by cutting regulatory barriers. Potential Treasury appointments reflect a push toward expanded credit access and reduced regulatory burden.

Roundtable Statement

Earlier this week, Roundtable President and CEO Jeffrey D. DeBoer issued a statement congratulating President-elect Trump and pledging to work with the new administration and Congress on pressing commercial real estate issues.

“We look forward to working with the President-elect and his team to advance policies that will expand the nation’s economy, boost job creation, increase the supply and affordability of housing, and address the many important national policy issues related to constructing, financing and maintaining modern real estate, work, living, and recreational buildings.

Strong real estate markets provide millions of American jobs, support strong local budgets, and help millions of people plan for retirement through their pension and retirement savings investments in real estate.

The strength of real estate and the benefits the industry provides to all Americans, depends on fair, consistent, and forward-looking policies at all levels of government.

Real estate public policies are nonpartisan. The Real Estate Roundtable supports policies based on objective economic principles that are responsive to changing economic cycles and sensitive to societal demands.

Tax and financial regulatory reform, housing investment, immigration issues, energy policy, and physical and cyber security each present opportunities to advance the economy and stability of U.S. real estate markets.

We are excited to offer our support, expertise and assistance to President-elect Trump and the new Congress. We are honored to contribute meaningfully to the strength and prosperity of our nation,” said DeBoer.

On Thursday, the Federal Reserve reduced the federal funds rate by 0.25 percentage points, setting the new target range at 4.5% to 4.75%. This marks the second consecutive rate cut, following a 0.5 percentage point reduction in September, as the Fed responds to moderating inflation and evolving economic conditions. (FOMC Statement, Nov. 7)

Fed’s Decision

• Policy Adjustment for Economic Stability: Fed Chair Jerome Powell noted that while inflation has eased to 2.5% as of August 2024, the labor market shows signs of softening: “This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we move toward a more neutral stance over time.” (Reuters, Nov. 7)

• Outlook for Future Cuts: The Federal Reserve's Summary of Economic Projections indicates the possibility of additional rate cuts in the coming months, with the federal funds rate projected to decrease to a range of 3.25% to 3.5% by the end of 2025. (Barron’s, Oct. 9)

Impacts on CRE

• The Fed’s rate cut arrives at a time when real estate capital markets are under considerable pressure. Industry leaders expect this move will enhance credit capacity and capital formation, support refinancing efforts, and stabilize property values.

• Credit Availability & Market Sentiment: The positive impact of a continued downward trend in the federal funds rate on CRE industry sentiment is reflected in the Roundtable’s Q4 Sentiment Index. The Q4 results showed a 9-point jump in the overall score of the Index, marking the highest score in three years, since Q4 2021. (Q4 Sentiment Index Survey)

• Implications for Property Refinancing: Decreasing financing costs could reignite projects that have been delayed due to high interest rates.The rate cut should facilitate refinancing efforts, particularly in sectors like office and multifamily, where challenges from post-pandemic occupancy shifts continue to impact valuations and cash flow.

Looking Ahead

• Chair Powell emphasized that future rate adjustments will be assessed on a meeting-by-meeting basis, allowing the Federal Reserve to respond flexibly to evolving economic conditions. Powell’s remarks suggest a cautious but adaptable stance, which CRE leaders can look to as they assess financing and investment strategies in a shifting economic landscape. (Wall Street Journal, Nov. 7)

• The Fed’s final 2024 meeting is scheduled for December 17-18. RER will continue monitoring rate adjustments, advocating for policies that support CRE stability and growth as the rate environment evolves.

• At FSU’s Real Estate TRENDS conference this week, Roundtable President & CEO Jeffrey DeBoer commented, “The Fed’s recent action to lower interest rates is a promising development for the commercial real estate industry. Reduced borrowing costs may help alleviate current pressures on project financing, foster investment, and ultimately support asset valuations as we enter a more balanced credit environment.”

DeBoer was a featured speaker at the FSU Real Estate Center’s 30^th Real Estate TRENDS conference this week, where he shared economic and political insights on the recent elections, on the Fed’s rate cuts, ongoing economic trends in CRE, and the industry’s upcoming political and regulatory landscape. 

The Real Estate Roundtable’s Q4 2024 Sentiment Index reached an overall score of 73, up 9 points from the previous quarter and marking its highest score since Q4 2021. The three year high reflects industry leaders’ cautious optimism that commercial real estate markets are stabilizing, showing signs of recovery and becoming well positioned for activity in 2025.

The Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive.

Roundtable Perspective

• Roundtable President and CEO Jeffrey DeBoer said, “The notable increase in sentiment this quarter reflects a combination of factors, primarily the Federal Reserve's rate cuts and expected future monetary easing. This action coupled with positive shifts in office leasing demand and a broader return-to-office trend are leading to greater price discovery and transaction volume. Housing supply constraints, access to energy sources, high operating expenses continue to present major challenges.”

• Compared to one year ago, sentiment on current conditions is up by 37 points, perception of future conditions is up by 20 points, and overall conditions are up by 29 points.

• In comparison to last quarter, sentiment on current conditions is up by 10 points, perception of future conditions is up by 7 points, and overall conditions are up by 9 points.

• Roundtable Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) commented on the Q4 Sentiment Index results: “The improved sentiment reflects the continuing recovery in commercial real estate, which is supported by improving liquidity in the market. This recovery will play out over time, and it is critical that we continue to support policies that help drive economic growth in communities throughout the U.S.”

Topline Findings

• All indices of The Roundtable’s Q4 Index are up, compared to the previous quarter and one year ago.

• The Q4 2024 Real Estate Roundtable Sentiment Index reached an overall score of 73, up 9 points from the previous quarter and marking the highest score since Q4 2021. The Current Index registered 69, rising 10 points from Q3 2024. Meanwhile, the Future Index hit 77, an increase of 7 points from the previous quarter and the highest level seen since 2011.

• Leaders in the industry are cautiously optimistic that the commercial real estate industry is showing signs of recovery and is well positioned for activity in 2025. Over three-quarters (77%) of Q4 survey participants said conditions are better now compared to this time last year, and 88% of respondents expect general market conditions to improve one year from now.

• Although there is some concern that multifamily assets will plateau in certain geographic areas, the market is optimistic about industrial development, Class A offices, shopping centers, and data centers. A significant 98% of Q4 survey participants expressed optimism that asset values will be higher (79%) or the same (19%) one year from now, indicating some semblance of expected stability. 71% of Q4 survey participants believe asset values are higher (38%) or about the same (33%) today compared to a year ago.

• 61% and 66% of respondents believe the availability of equity and debt capital, respectively, has improved compared to one year ago. There is even more optimism for the future, with 80% and 79% of participants believing the availability of equity and debt capital, respectively, will be better one year from now. While commentary indicates that the capital markets are starting to open, the cost of capital remains elevated from previous levels.

Data for the Q4 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in October. See the full Q4 report.