The real estate market is in for some turbulence in 2017, but it is not time for investors to hide under their beds, according to LaSalle Investment Management's latest Investment Strategy report.
“While there is a good chance there will be some real game-changers … with (Donald) Trump's election, Brexit, Italian referendum and more to come in 2017 … investors should future-proof their portfolios by trying to get ahead of certain slow-moving secular trends including climate change and urbanization,” said Jacques Gordon, global strategist in the real estate money manager's Chicago office, in an interview.
In the U.S., there is significant uncertainty surrounding Mr. Trump's policies and direction, as well as the future relationship between Mr. Trump as president and the Republican-controlled Congress, the 2017 annual report, released Tuesday, noted.
Tax cuts, infrastructure spending, deregulation and improved business sentiment — all things Mr. Trump has promoted — would benefit real estate investments, the paper stated.
Real estate connected to infrastructure projects typically does extremely well, Mr. Gordon said. Examples include projects to convert abandoned rail lines into walkable urban spaces such as Manhattan's High Line and similar projects in Atlanta, Chicago and Portland, Ore., he said.
“All of this takes infrastructure spending to get it going,” Mr. Gordon said.
However, trade wars, reduced immigration, interest rate increases and a standoff between Congress and the president on deficit spending would be negative for real estate investors.
A trade war, for example, could hurt U.S. exports and real estate related to the technology, media and telecommunications sectors, the report noted.
“This is not a time for fear and terror,” Mr. Gordon cautioned. “It's a time to pay attention and be aware of the structural changes that are coming, to be more cautious and to find places to move to offense.”
The four main structural, long-term trends that LaSalle tracks are demographics, technology, urbanization and environment. The latter category, new this year, covers climate change awareness, sustainability initiatives and measures to benefit the health and welfare of building users.
Investors should keep these trends in mind as they can dramatically affect real estate holdings, the report states. This means focusing on the parts of the city where there are demographic, urbanization, technology and environmental change drivers, Mr. Gordon said.
Read the longer story on the report here.