Under all is LAND

The effects of the National Debt on Commercial Real Estate is a conversation that will be top of mind going forward into the New Year. Borrowing for the Cares Act to assist U.S. companies and citizens was imperative for the U.S. economy to stay on track as the virus continues to spread. While the government has borrowed more now than ever in history, low interest rates has increased sales contract for homes and development. Americans are charging ahead regardless of the virus.

While our debt is greater than the GDP and steadily increasing, Congress has not done what they have preached in creating jobs, jobs, jobs. Good tech jobs will increase the GDP and if balancing the deficit becomes a priority for them, it will be considered a positive for all of us.

Real Estate is doing well and that’s good for construction and supply. As the economy moves along parallel to the National Debt, what is the predictable outcome? As we know, the deficit plays a role with interest rates and ultimately triggers the cost of capital and property pricing, therefore affecting yields. But again, the Cares Act assistance and emergency help for tenants and mortgages continues to affect the deficit. By 2030, the projected debt will be roughly $29.5 trillion. This will make it harder for Congress to budget for needed projects like infrastructure, education and the like which promotes growth in real estate. Not yet seen, the breaking point is where the National Debt is out of control and investors lose faith.

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