President-elect Donald Trump, pictured before his victory in the November general election, speaks during a campaign rally in Fayetteville, North Carolina. — Courtesy: Donald J. Trump for President
By Joshua Burd
With inauguration day on the horizon, there has been no slowdown in speculation over how a Donald Trump presidency will impact the commercial real estate sector.
Real Estate NJ asked two experts to look at hints the president-elect may have dropped during the campaign and the transition period — however cryptic or uncertain they might have been — and offer their thoughts on how the market will fare in New Jersey and nationally.
Their analysis focused largely on the sectors that drive the Garden State’s real estate market and how their growth may impact demand from users.
Here’s what they had to say:
Peter Muoio, chief economist with Ten-X, the online real estate marketplace, said it’s typical for there to be uncertainty about an incoming president. The Trump administration is no exception — and the uncertainty is perhaps even higher — but the real estate mogul has offered some cues about which policies will at least be on the table.
“We don’t know about these policies exactly or the degree to which they’re going to be done or not done,” he said. “But of the things that he has talked about, some of these are suggestive of having a particular impact on New Jersey, some positive and some negative.”
For instance, Muoio pointed to the stock market’s postelection rally and the fact that pharmaceutical companies were among the best performers at the time. He said market participants were heartened by a belief that a Trump administration “would take a less regulatory or aggressive stance toward the pharmaceutical industry.”
That belief was heightened by Trump’s pick for the Department of Health and Human Services, Rep. Tom Price of Georgia, a Republican who is known to bristle at government invention. The true path of the department and the Food and Drug Administration remains to be seen, Muoio said, but it bears watching.
“New Jersey, having a relatively large pharmaceutical sector, would benefit from the degree to which the pharmaceutical industry has a better growth trajectory than it did under a different scenario,” he said.
Experts say other sectors could be in store for expansion under President Trump. Sandy Herrick, founder and managing principal with Case Real Estate Capital LLC, pointed to the fact that interest rates have ticked up after being “bizarrely low for a long time,” so it’s now “reassuring that we can see people believe in some growth.”
Along with what he believes will be some additional upward movement of interest rates, Herrick said he expects to see a positive impact on the financial sector. That could only help submarkets in New Jersey that rely on banking and financial institutions.
“I think that New Jersey, in particular, will benefit because I think there’s going to be a loosening of banking and investment banking regulations,” said Herrick, whose firm is based in Rochelle Park. “And New Jersey, particularly the coast areas — Weehawken, Jersey City, Newark — benefit from growth in financial service, so I think that’s clearly happening.”
But not every industry stands to be lifted up by the incoming Trump administration — at least, when it comes to real estate. Muoio said the recent expansion by health systems in New Jersey may be slowed by any revisions to or replacement of the Affordable Care Act — possibilities that have become increasingly likely as the inauguration approaches.
If that results in cutbacks to federal funding, whether it’s through Medicaid or another source, that may temper growth by large medical centers and the surrounding neighborhoods they support.
Muoio pointed to another source of buzz during Trump’s campaign and transition period — the threat of tariffs on countries such as China and the prospect of reworking or scrapping trade agreements. He cautioned that nothing has been formalized and may not be for some time, but said any threat to trade could hurt the region’s booming logistics and distribution sector.
“(New Jersey) has a massive port and industrial complex tied to global trade,” Muoio said. “Any policies postelection that would be detrimental to trade flows would be detrimental to that commercial real estate segment within New Jersey, which is a big one.”
And while Herrick said “there was an enormous amount of uncertainty” during the campaign about how a Trump presidency would impact the economy — much of driven by Trump’s bombastic style — the passing of the election has helped to ease some of those insecurities. He said he was “terrified that the market was going to react to him very, very badly,” but conceded that he was now “surprisingly optimistic” based on how things played out at the end of 2016.
“So I’m cautiously optimistic, and in my years of being in the real estate business, optimism is the most important part of making money,” Herrick said. “And it’s general optimism, so people can see a way through their investments.”
