Possible ‘fiscal cliff’ issues for CRE market

The "fiscal cliff" may cause problems for the commercial market.

Many property management companies may be concerned about the "fiscal cliff's" effect on the commercial real estate market. While there are still worries about the impact, averting this issue could be critical to the commercial market's recovery, as a whole.

The possibility of a fiscal cliff is a problem for the commercial real estate market, as it would likely stop recovery completely, a report from Cassidy Turley explained. However, the scenario, which would likely guarantee another recession, will probably not occur.

On the off-chance a resolution is not reached, there would be significant consequences throughout the country.

"When you examine our study's details, you quickly realize how damaging the fiscal cliff will be for so many markets across the country," said Kevin Thorpe, chief economist for Cassidy Turley. "Washington, D.C., has an obvious bulls-eye on its back, but our study finds that the majority of metros – 23 out of the 30 metros tracked – will experience a recession in 2013 if the tax hikes and spending cuts are not scaled back significantly."

With this in mind, the federal government will likely come to a compromise for the short-term, the report explained. This will include multiple decisions that could directly benefit the commercial market. One of these aspects is the group of tax cuts put into effect during the Bush administration. These may get extended through the first quarter of next year. With the extra time allowed, the legislative branch may leave some time for a solution to the debt ceiling. However, a full plan will need to be agreed upon next year.

The report added that economic growth and consumer confidence are on the rise, which may help the market's sustainability in the future.

Commercial construction may improve next year
The level of commercial property construction may continue to pick up steam into next year, as there are improving conditions in the market.

Overall nonresidential construction will rose by more than 5 percent next year, according to a report from Associated Builders and Contractors. This is due to the continued steady improvements recorded in recent years, which signal a strengthening situation for developers. Additionally, total commercial construction should jump by 10 percent through 2013, with power construction increasing by the same amount.

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