Still Waiting: Presidential Election Too Close to Call

Executive Summary

• The presidential election outcome may remain undecided for several days until results are fully in from Georgia, Michigan, North Carolina, Pennsylvania and Wisconsin.
• The House will remain in Democratic hands. While several key races remain outstanding, it appears likely that the Republicans will retain their Senate majority.
• Key issues for real estate from the split outcome include the pace of economic recovery, global trade, taxes, health care and the regulatory environment.
• Certain local issues affecting commercial real estate also remain undecided. These include Proposition 15 in California. The ballot initiative to increase taxes on commercial properties is failing narrowly as of this writing.
• The market’s initial reaction to a likely divided government in 2021 has been favorable. As of late morning, the S&P was up 2.8% and the Nasdaq was up 3.8%. The 10-year Treasury also rallied with the yield falling to 0.77% late this morning.
• Regardless of the election outcome, CBRE expects a sharp slowing of economic growth in Q4 2020 before the rebound regains strength in 2021. Recovery of property market fundamentals will lag the broader economy to varying degrees across property types.

State of the Presidential Election

The U.S. presidential election remains undecided, largely due to the high number of mail-in votes amid the pandemic. Five states will likely decide the winner of the presidency: Georgia, Michigan, North Carolina, Pennsylvania and Wisconsin. These votes likely won’t be fully tabulated for several days. Should the results be contested in court, the official outcome could be delayed further. Nevertheless, the uncertainty of the election is not expected to materially impact near-term macroeconomic conditions.

Issues

The outcome of several pending Senate races will determine the extent to which certain issues impact commercial real estate. Should the Republicans retain the Senate as expected and Biden wins the presidency, policies that the executive branch can put into effect independently, such as global trade and regulation, will take precedence. Fiscal stimulus likely will be more limited ($1 trillion or more) should the Republicans hold onto the Senate, though it could be more if Trump wins reelection. Should Democrats take control of the Senate under either Trump or Biden, a COVID recovery package likely will reach and possibly surpass $2 trillion. A Democratic Senate along with a Biden win could result in major legislative action affecting federal spending, taxes and health care.

What Comes Next

Pennsylvania ballots postmarked by Election Day can be counted until Friday. As such, CBRE will be closely monitoring results for impacts on property markets and will weigh in with additional analysis once results are finalized.

Regardless of elections results, CBRE expects economic growth will slow in Q4 2020 before a strong recovery takes hold in 2021 with expected GDP growth of 4.5% for the full year. Recovery of property market fundamentals will be increasingly apparent in the second half of 2021.