U.S. MarketFlash:
Investments During Presidential Election Years:
Deal or No Deal?

Executive Summary

• There has been little impact on commercial real estate investment volumes and property values during recent presidential election years.
• Cyclical factors, such as the Great Recession in 2008, have had the greatest influence on investment and pricing levels, rather than any perceived positive or negative election impacts.
• In some jurisdictions, the result of local ballot issues (e.g., property taxes; rent regulations) could have a greater impact on commercial real estate.

Should investors delay commercial real estate acquisitions amid the uncertainty of a hotly contested presidential election? Have prior presidential election outcomes caused a noticeable decrease in investment volumes or total returns that makes investment now less ideal? CBRE Research has found that there is little effect on volumes or returns from presidential elections.

The Data

Since 2004, overall investment volume increased on a year-over-year basis in every third quarter of a presidential election year except for 2008 during the Great Recession. Furthermore, every fourth quarter of a presidential election year recorded year-over-year growth, except in 2008 and 2016. In the first two quarters of the year following a presidential election, 2009 and 2017 saw negative year-over-year growth in investment volume. The drop in 2009 was largely attributable to the Great Recession. In 2017, modest investment volume in the first half of the year gave way to record volume in 2018.

Figure 1: U.S. CRE Investment Volumes

Source: CBRE Research, Real Capital Analytics, September 2020.
Note: Shaded areas indicate presidential election years.

There also have not been any consistent or discernible impacts on investment volume and pricing in gateway markets or across property types during presidential election years. Cyclical factors, such as changes in economic growth, pricing and overall risk appetite, have had the most influence.

Figure 2: U.S. CRE Quarterly Total Returns

Source: CBRE Research, NCREIF, September 2020.
Note: Shaded areas indicate presidential election years.

Based on NCREIF data, cyclical factors, rather than presidential elections, also have the most influence on commercial real estate total investment returns. Most recently, lower total returns leading up to the 2016 election can be attributed to asset values reaching high levels at a late stage in the investment cycle. However, income returns remained steady during that period. This is consistent with a view that property fundamentals and income returns are influenced by overall employment levels. On the other hand, election results and geopolitical events generally do not affect overall employment.

The Bottom Line

Investment volume and total return data suggest that presidential election years should not be a reason to delay property transactions. Investors should continue to focus on sound underwriting practices that take cyclical considerations, local market conditions and demand for specific property types into account. Nevertheless, federal elections can affect certain industries more than others, such as oil & gas, health care and those that depend on military spending. Local elections have a more direct impact on commercial real estate, since they often involve issues like property taxes, rent regulations and related dynamics.