The political climate has not had a negative effect on commercial real estate. An exception could be perhaps in acquisitions of single-family houses in high tax states. There are provisions in the recent tax bill that permit accelerated depreciation of renovations. There is clearly an issue for Chinese investors to purchase technology concerns and infrastructure. Technically, CIFIUS deals with security and infrastructure. There has not been a widening of its scope to include real estate. I would focus on buildings not vital to defense or security and would stay away from trophy buildings. During the present administration, we do have volatility. No one can tell you that will even out.
How has the political climate impacted commercial real estate investment in the U.S.?
We are a Chinese developer that has been involved in projects in North America and Europe. We continue to evaluate future opportunities in both continents. We are a bit wary of deals in the U.K. because of Brexit. We are somewhat concerned about the current political climate in the U.S. However, has there been seen a tangible impact on commercial real estate due to the new administration? What impact could further political volatility have on the U.S. commercial real estate market?
From which country are you referring to? Some investors prefer the current administration, versus other investors who are concerned about investing in U.S. real estate at this time. If you are a Chinese investor, we still see sufficient investment inflow activity within the U.S. from China. We also carefully analyze investments in the U.K. due to Brexit. Unfortunately, not having a solid foundation of how the trade policies and investment structure would work in the U.K. after Brexit does concern any new investor considering investing in the U.K. market. With regards to other European countries, we see a lot of activity by Chinese investors progressing in a positive manner.
I think many in the real estate industry in the U.S., as well as investors from abroad, are concerned about the administration in general and how it handles global political issues, in particular. Last year, that, combined with uncertainty over the tax bill, caused a slowdown here in real estate. But once the new tax bill was passed, much of that uncertainty ended and most investors determined that even though there were still causes for concern, it did not make sense to sit it out and wait on the sidelines since our economy and employment are strong. Historically, a strong economy, stable interest rates and job creation have been the most important factors in the strength of the real estate market, and all of those signs remain strong, so investors are now investing and things seem to be moving on a healthy and normal path. However, everyone knows that with this administration, it is more difficult to predict what it may do and how things can change, so people are watching carefully at all times.