How the Elections Affect Retail Real Estate

You know all about the the sweeping Republican gains in Congress and statehouses. That in itself will affect the industry.

To just name one example, the threat of a rise in the taxation rate for carried interest will be a virtual impossibility. Republicans staunchly opposed that proposal. It only ever was able to gain traction in the House when it's been brought up in the past. It has never been able to move forward in the Senate. It seems unlikely that the lame duck session will take up this issue at all.

On the flip side, a combination of a Democratic President, Republican House and an essentially split Senate spells gridlock. Will Congress get anything done in the next two years at all? Some might argue that the best Congress is an ineffective one since not passing any major legislation means they won't be able to mess things up worse than they already are. But if the economy continues to flounder, I don't think voters will be too pleased two years down the line if this next Congress has no accomplishments to lean on.

Beyond that, a common theme in the business world leading up to the election was that the uncertainty about what might be coming out of Washington in terms of taxation and regulation was holding back investment and job creation. An improving employment picture, of course, is essential for a robust commercial real estate recovery to occur. The implication of that certainly seemed to be that a Republican victory would be better for business, since that would make tax increases or increased regulation less likely. So now we'll just have to see if the victory does translate into businesses loosening the purse strings and beginning to hire and invest. Let's just hope that this wasn't merely a talking point.

In addition to the big changes, there was one ballot measure in Maryland that you may not have heard about that sets an interesting precedent for retail real estate. In Anne Arundel County, voters approved a ballot item that will enable Cordish Co. to add slot machines to Arundel Mills Mall.

A bitter fight was waged for months between supporters and opponents of that measure. The passage means that Cordish will be able to add a $430 million casino to Arundel Mills. This was a quirky situation, but it does lead me to wonder if this works out well for Cordish and the state (with the boost in tax revenues) whether this is something other mall owners might explore for some properties.

Update 11:55 AM: The National Retail Federation has put together a very useful write-up of how the election will affect issues important to retailers. Definitely worth a read.

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