While 1031 exchanges are a potential problem with the Biden administration and a Democratic Senate and Houseof Representatives, some potential policiescould make net lease investors happy overthe next couple of years.
Randy Blankstein, president of TheBoulder Group, is optimistic about theOpportunity Zone program.
“Opportunity Zones will probably
expand in the Biden administration,”
Blankstein says. “The areas of net lease that
focus on lower-income areas will expand
under a Biden administration. So perhaps
people will be targeting those areas, espe-
cially properties in Opportunity Zones.”
Matt Berres, executive managing
director of Net Lease Capital Markets at
Newmark. also sees some potential posi-
tives for the sector from a Biden adminis-
tration. “Opportunities may arise in sec-
tors like education and medical-retail as
the new administration increases educa-
tion and healthcare spending,” he says.
“For instance, with expanded healthcare
coverage, there could be increased
demand for easily accessible medical
space, including urgent cares, clinics
located inside grocery and drugstores.”
Some tax law changes could drive
growth in new areas, continuing the
migration to places like Florida, Texas
and Las Vegas. “High-tax markets could
face headwinds as a result of increased
corporate taxes, which could accelerate
the trend of corporations leaving some
major gateway markets and moving to
more business-friendly areas,” Berres
says. “The office and industrial sectors
could be both the largest beneficiaries
and hardest hit, depending on an asset’s
location.
The biggest Biden contribution to netlease, and really the country as a whole,would be a successful, timely rollout ofPaycheck Protection Program (PPP)Loans and COVID- 19 vaccinations.
“We are anticipating that the nextround of PPP will give businesses 2. 5months of payroll and get them throughthe spring,” says Camille Renshaw, CEOand Co-Founder of B+E. “Assuming thevaccine is truly available to everyone whowants it by June, many of our tenants will
HOW NET LEASE STANDS TO BENEFIT FROM THE
BIDEN ADMINISTRATION
Apartments, office and retail are all following a similar trend: risingvacancy rates with declining rents.Moody’s Analytics calls the dynamic“bleak, but not dire,” noting that whilemost metros are following a similar pattern, most of the declining fundamentals are more moderate than originallyexpected.
The national apartment vacancyrate climbed to 5.2% in the fourthquarter, up nominally from 5.1% in thethird quarter and 4.7% in the fourthquarter 2019. Apartment rents fell anadditional 1.4% in the fourth quarterand are down 3.1% for the year.
VACANCY CLIMBS AS
RENTS FALL ACROSS
MULTIPLE ASSET
CLASSES
begin to sprint over the summer as we allpour into in-person venues and spendmoney.”
Renshaw and most of her clients are
unconcerned about changes in 1031
exchange law due to the slim Democrats’
majority. “Congressmen will have diffi-
culty getting much done over the next
two years unless the Democratic Party is
completely aligned on an issue,” she says.
“And conservative and centrist
Democrats support the current 1031
exchange law.”
Others echo those thoughts. Jonathan
Hipp, principal, US Capital Markets and
head of U.S. Net Lease Group at Avison
Young says multiple administrations have
talked about doing away with 1031
exchanges. “It’s not like this is the first
time it has ever been brought up,” Hipp
says. “The fact of the matter is Biden’s
administration has got a lot on its plate
with the pandemic. I don’t think they’re
going to eliminate it. There could be
some modifications to it, but I don’t think
they’re going to wipe it out.”
—Les Shaver
