While uncertainty remains over the economic impact of a Donald Trump presidency, real estate executives have zeroed in on a point of optimism, the president-elect’s promise to improve infrastructure.
During his campaign, Trump pledged to allocate $1 trillion for infrastructure spending over the next decade. He reiterated that promise after he won the election.
“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it,” he said during his victory speech last week.
Joseph Sitt, the CEO of Thor Equities, said that he is confident that Trump will deliver on his pledge.
“I have been saying for a long time that investing in modernizing our infrastructure will improve the U.S. economy as well as create much needed jobs for the working class, and thus be a driver of economic well-being for all income levels,” Sitt said during a Swiss Economic Forum event last week. “I am optimistic that president-elect Trump will execute on our mutual passion for this important initiative.”
Meanwhile, Danny Fishman, the managing partner of Gaia Real Estate, said that Trump’s presidency may be most beneficial to New York City, which overwhelmingly voted for Democratic candidate Hillary Clinton. According to the latest election results from the New York Times, Trump lost in four of the city’s five boroughs. In Manhattan, Clinton won by a vote count of 515,481 to 58,935. The numbers were almost similar in Brooklyn, with Clinton winning 595,086 to 133,653. The only New York City borough that Trump won was Staten Island, which had a vote count of 95,612 to 67,561. During the election, his base of support proved to be the Rust Belt states of Pennsylvania, Ohio, Michigan and Wisconsin.
“At the end of the day, he’s talking about reducing taxes and building infrastructure, which Manhattan and New York needs. For these two big things, if he’s going to do it, a place like Manhattan wins big time,” said Fishman.
According to Heidi Learner, the chief economist at real estate services firm Savills Studley, the early returns on a Trump presidency have not been catastrophic. She said that investors are likely waiting for more information on the Trump administration’s economic plans before formulating a strategy.
“The biggest surprise was that the concerns that characterized the markets on election night appear to have dissipated,ˮ said Lerner. “Equity futures reversed their triple-digit decline, the dollar rallied against the yen and euro, and the flight-to-quality rally in the bond market faded. This could be an indication that the market is going to take a wait-and-see approach over the coming weeks and months leading up to the inauguration.
“With equity markets generally performing well and the dollar remaining strong, it seems to be business as usual. Once specific policies are laid out over the next few weeks and months, however, market reactions may change,” she said.
Learner also pointed to the long-term nature of commercial real estate investment as a reason for optimism.
“Real estate tends to be a long-term asset that is more immune to any singular event. Therefore, the election is not likely to have an immediate effect on demand, construction or the completion of specific transactions. Looking back on past elections, we find the impact on commercial real estate to be minimal both in terms of leasing and investment,” she said.
“Interest rates have begun to rise on the assumption that some of Mr. Trump’s tax and trade policies and infrastructure spending may be inflationary. Financing may become more expensive, but any increase in rates is unlikely to affect vacancies and rents in the short term. The other channel that could affect commercial real estate is via currency moves — where any decline in the dollar could make foreign investment into the US that much more attractive from a currency perspective.”
If Trump follows through on his $1 trillion pledge, he would surpass the Obama administration’s allocation for infrastructure spending.
In December 2015, a bipartisan bloc in Congress approved a five-year, $305 billion infrastructure bill. The final amount was lower than the $478 billion that the Obama administration proposed.