Steve Francis, Director
GRS | Title
(804) 486-9465
[email protected]
Some major commercial real estate organizations are unhappy with the current direction tax reform is headed.
The National Association of Realtors is reportedly saying that proposed changes to the personal tax code could lead to another housing crash. It could negatively impact home buildings as well as mortgage lenders. And we saw how well that worked out for the commercial real estate industry during the Great Recession.
As Bisnow reported in May, the National Apartment Association and the National Multifamily Housing Council joined forces, forming an effort called Protect the Lease.
A recent video report discusses the seriousness of abolishing the 1031 Exchange sector, which would have major reverberations throughout commercial real estate. The director of public affairs at the National Apartment Association, Jim Wilson, said it is very important for industry investors to contact their representatives in Congress.
He also pointed out that the last time there was comprehensive tax reform in 1986: “Things didn’t end well for commercial real estate. This industry woke up with a pretty bad hangover.”
On the proposed corporate interest deduction, he said: “That is a tool that is used throughout commercial real estate, certainly in the apartment and housing industry. To wake up tomorrow, and you don’t have the ability to deduct that interest, that is a sea change.”
In regards to 1031’s specifically, he said that scores of individual investors, who happen to invest in commercial real estate, could be in store to lose millions of dollars.
This could certainly impact the retail sector of net lease, which CBRE contended earlier this is strongest property type in this arena by the number of assets traded, and said in a March report that there was still cautious optimism. In the full study, CBRE said investors’ net lease interest is strong (PDF download). There were 9,100 net-lease retail assets sold last year, most of them housed by expanding retailers, especially drugstores like Walgreens.
The firm also said that despite the tax-reform proposals, there is still plenty of capital chasing these types of properties, upwards of $140 billion.
As with any wide-ranging economic proposals made by the federal government, nothing happens until it actually happens. The tax-reform proposal is certainly not set in stone, and there has been little indication that anything tangible can happen soon.
All commercial real estate investors can really do is make their concerns known to their congressional representatives, and beyond that, hope for the best.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies, and delivering customized solutions to assist our clients in achieving their investment goals.