T
he commercial real estate market is being shaped by two major forces: the Federal Reserve's interest rate cuts and the economic policies of the Trump administration. These factors will significantly influence the sector's future trajectory, with the Trump administration's policies expected to positively impact the economy and benefit commercial real estate. Key proposals include further corporate tax cuts and the potential renewal of provisions from the 2017 Tax Cuts and Jobs Act, which could stimulate economic activity and boost consumer spending.

    However, additional challenges remain, particularly with proposed trade policies that could increase construction costs and create inflationary pressures. The preservation of the 1031 exchange is also a critical factor for the real estate market, as it drives job creation and attracts development capital. Policies such as opportunity zones and bonus depreciation could further stimulate investment in underserved areas.

    Interest rates are another significant determinant of commercial real estate performance. The Federal Reserve's recent rate cuts aim to manage inflation while maintaining full employment. While short-term interest rates are directly influenced by the Fed, long-term borrowing rates are shaped by broader economic factors like inflation expectations and employment trends. The anticipation of new tax policies has already begun to influence the market, with the 10-year Treasury yield rising due to concerns over inflation.

    Despite these challenges, the long-term fundamentals for commercial real estate remain strong. Investors who focus on the sector's long-term potential will be best positioned to succeed.