Commercial real estate, overall, is a winner and largely exempt from the most significant adverse provisions, namely limitations on interest deduction and 1031x repeals. The proposed tax changes could prompt a flurry of restructuring, with a period of transition and market flux as investors restructure to optimize tax outcomes and markets readjust. History suggests that changes in tax laws, by themselves, are often not a key driver for CRE investment decisions.
- Expect a moderate positive impact on multifamily/renting economics, retail, and industrial and a minimal effect on office.
- States like California, New York, and New Jersey are likely to be affected, yet negative impacts could be counteracted by robust, underlying real estate fundamentals and job growth in these markets.
- Real estate investors benefit—some more than others—and much depends on which version of the bill passes.
- We predict 80% chance of enactment by year end 2017.
Read more detailed analysis of the plans – including an interactive map of which cities would be most heavily impacted by the change to residential real estate taxes.