Elections Have Consequences

The quote “elections have consequences” is credited to former President Obama. It rings true no matter what side of the political spectrum you fall on, and it will certainly be the case in November given the increased polarization of America’s political discourse that we are now all experiencing.

Tension levels have spiked, the partisan rhetoric is blasting at full volume and the media continues to stir the pot with hyperbolic headlines on a variety of issues, big and small. While it is not unusual for tensions to run high in an election year, we can’t remember them ever running at this feverish a level.

We have written about the Election Effect on this blog before and we decided that this would be a good time to revisit the topic as the countdown to the national election is just around the corner and both parties are making their cases via their national conventions. What do we mean by the Election Effect?

Essentially, it is the change in decision-making posture attributable to uncertainty over the outcome of the election. In our post about the Psychology of Decision Making we talked about a decision-making continuum that ranges from Offense to Neutral to Defense. Each of us faces a constantly changing level of uncertainty in our daily business lives. If we are feeling good about prospects for growth, we go on offense by hiring more people, taking more space and pursuing growth opportunities. If we are less certain about the future, we tend to more cautious and adopt a more neutral approach to taking on additional risk. If we see significant threats to our business growth in the near term, we tend to take a defensive approach and pull back on spending and expansion because of higher perceived risk.

For many of those we speak with every day, the Election Effect is very real. We hear clients and potential prospects express concern over making a real estate decision with the election just around the corner. Tenants and buyers tell us they will wait until after November 3rd to consider a new lease or potential acquisition, as many of them believe the outcome of the election may cause a market correction. Many property owners are concerned over the same thing and are contemplating dispositions as a defensive move.

So far, lease rates and sales prices remain at pre-pandemic levels and the industrial sector is still the economic bright spot across the country. But, the Covid-19 virus just gave us all a lesson on just how fast things can change. This fact is not lost on those who own or occupy industrial real estate. So, they pull the gear shifter back in neutral and focus on day-to-day operations rather than on future growth. For the hardest hit by the current economic slowdown, that is as much out of necessity as it is out of choice. The Election Effect is another layer of complication and source of concern. Thus, their neutral stance is quite understandable given the circumstances.

So, what are the major issues surrounding this election? Continue to Part 2 where we look at the one that concerns us most: Taxation at the state and federal levels.