While 1,031 stock exchanges are a potential problem for the Biden administration and a Democratic Senate and House of Representatives, some potential guidelines could keep net lease investors happy for the next several years.
Randy Blankstein, President of Boulder Group, is optimistic about the Opportunity Zone program.
“Opportunity zones are likely to be expanded in the Biden administration,” says Blankstein. “The areas of the net lease that focus on lower income areas will be expanded under the management of Biden. Maybe people are targeting these areas, especially real estate in opportunity zones. “
Matt Berres, CEO of Net Lease Capital Markets at Newmark. also sees some potential positive aspects for the sector from a Biden administration. “In sectors like education and medical retail, opportunities can arise if the new administration increases spending on education and health,” he says. “For example, with extended health coverage, the demand for easily accessible medical rooms, including urgent care, clinics in grocery stores and drug stores, could increase.”
Some changes in tax law could spur growth in new areas and continue migration to Florida, Texas and Las Vegas. “High tax markets could face headwinds from increased corporate taxes, which could accelerate the trend for companies to leave some key gateway markets and move to more business-friendly areas,” Berres said. “The office and industrial sectors could be both the biggest beneficiaries and the hardest hit depending on where an asset is located.
Biden’s greatest contribution to the net lease and indeed to the entire country would be a successful and timely introduction of PPP loans (Paycheck Protection Program) and COVID-19 vaccinations.
“We assume that the next round of PPPs will give companies 2.5 months of payroll accounting and will last until spring,” says Camille Renshaw, CEO and co-founder of B + E. “Assuming the vaccine is real available to anyone wanting it by June, many of our renters will start sprinting in the summer when we all flock to personal facilities and spend money. “
Renshaw and most of their clients are not concerned about changes to the 1031 foreign exchange law due to the majority of slim Democrats. “Congressmen will struggle to achieve much in the next two years if the Democratic Party is not fully focused on one issue,” she says. “And conservative and centrist Democrats support the current 1031 exchange law.”
Others repeat these thoughts. According to Jonathan Hipp, principal at US Capital Markets and head of the US Net Lease Group at Avison Young, several administrations have been talking about getting rid of 1031 exchanges. “It’s not that this is the first time it’s mentioned,” says Hipp. “The fact is, Biden’s government has a lot to do with the pandemic. I don’t think they’ll fix it. There might be some changes, but I don’t think they’ll erase it. “