We have a debate among the editorial staff in our office on this one, so I promised to write a post on my opinion.
We dread election years. For one, we are mostly dissuaded about injecting politics into our business-to-business publications. But the reason we most dread is the following situation:
As a reporter, you ask: “What do you see for commercial real estate in 2012?”
The source says, “It’s hard to tell. The election could change a lot of things.”
Now, my contention on this statement is that politics (at the federal level) have rarely had an effect on commercial real estate. Many of you will disagree with me and that’s fine. But I can only think of three times in the last 50 years when federal legislation has had a direct impact on commercial real estate in the long term. The first was the creation of REITs (this is actually more than 50 years ago); the second was the Tax Reform Act of 1986 and the last time was the creation of the Resolution Trust Corporation during the Savings & Loan bailout.
Of these three, I’d argue two had a positive effect on commercial real estate. REITs — who doesn’t like them? And how many companies in our industry were formed in the RTC days? One person’s trouble is another’s opportunity, right? The 1986 tax code affected real estate negatively, I’ll argue, because it eliminated syndicated real estate deals and in part led to the S&L crisis; positively, it forced commercial real estate investors to own real estate for the right reasons, not just a tax write-off.
My take on “the election could change a lot of things,” line has been interpreted to mean, “congress could change the capital gains tax rates after the election.” Well, it could. I’ll also note that the maximum rate for capital gains has remained largely the same since the 1986 tax code was issued — 25 years ago (not that I’m advocating change).
— Randall Shearin is editor in chief of Shopping Center Business magazine.