A report by Newmark Grubb Knight Frank on the area's megatrends is being released this week and it includes some predictions on how the Trump Administration could impact the District and surrounding area.

A Modestly Positive Impact on Office

One conclusion it reached is that the Trump Administration could have a modestly positive impact on the Washington office market. The largest gains will be seen in specific jurisdictions that are home to industries that will benefit from the new administration's proposed policies, according to the report. One particular example is government contracting, especially relating to the defense industry.

However, the Republican-controlled legislature is likely to favor reduced spending for domestic social programs, along with their related agencies, the report said.

Notable examples include the Environmental Protection Agency, which President Trump has pledged to defund. When examining the new administration's planned policies as a whole, it seems likely that there will be clear winners and losers, with the projected gains in local employment for certain sectors offset by proposed spending and personnel cuts in other sectors.

Will Foreign Investors Still View DC Favorably?

NGKF also looked at the impact the Trump Administration could have on foreign investment in DC's real estate. Here, the conclusion was a bit more tenuous, although it did note that investment should remain strong for the remainder of this year.

Let's start with the obvious: Foreign investors have been good to Washington DC. Between 2013 and 2016, foreign capital purchases rose from 22% to 32% of total transaction volume. Data for 2017 year-to-date shows an even greater increase in foreign capital investments locally, with foreign investors contributing over half of all transaction volume through February, according to the report.

But it is unclear how long this consistent flow of foreign capital will last — especially as the answer may be at least partly influenced by politics. NGKF writes that:

Having already attempted to implement a travel ban on nationals from seven Muslim-majority nations, some asset owners are concerned that foreign investors looking to purchase investment-grade properties — particularly Middle Eastern firms — may turn their attention to countries that offer a more welcoming message.

Right now, foreign investors seem to be more interested in the market's long-term safety and the stability of returns and NGKF reports that foreign investors continue to view Washington positively. It anticipates that this trend will continue through the end of 2017 even as interest rates rise modestly.

“Compared with stocks and bonds, commercial real estate represents an attractive opportunity for institutional investors seeking consistent returns and a way to rebalance their portfolios,” the report concluded.

WASHINGTON, DC–Since the US presidential election, the stock market has risen by 5%. This increase has been attributed to investors' confidence that with all levels of government controlled by the Republicans, a comprehensive tax plan will be passed, President Trump's $1 trillion infrastructure investment proposal will be implemented — more or less — and certain regulations will be rolled back.

The regulatory rollback is well underway, with some 90 rules loosened or stricken, according to the White House. Tax reform is expected to be tackled after health care and it is unclear where the infrastructure plan will fit in. Trump, however, seems to expect that it will happen.

It will be some time before these anticipated benefits will actually be realized and the stock market may well retrench a bit if Congress stalls or can't get legislation passed.

Administrations, though, also have an impact in other ways — especially in a city like Washington DC.

A report by Newmark Grubb Knight Frank on the area's megatrends is being released this week and it includes some predictions on how the Trump Administration could impact the District and surrounding area.

A Modestly Positive Impact on Office

One conclusion it reached is that the Trump Administration could have a modestly positive impact on the Washington office market. The largest gains will be seen in specific jurisdictions that are home to industries that will benefit from the new administration's proposed policies, according to the report. One particular example is government contracting, especially relating to the defense industry.

However, the Republican-controlled legislature is likely to favor reduced spending for domestic social programs, along with their related agencies, the report said.

Notable examples include the Environmental Protection Agency, which President Trump has pledged to defund. When examining the new administration's planned policies as a whole, it seems likely that there will be clear winners and losers, with the projected gains in local employment for certain sectors offset by proposed spending and personnel cuts in other sectors.

Will Foreign Investors Still View DC Favorably?

NGKF also looked at the impact the Trump Administration could have on foreign investment in DC's real estate. Here, the conclusion was a bit more tenuous, although it did note that investment should remain strong for the remainder of this year.

Let's start with the obvious: Foreign investors have been good to Washington DC. Between 2013 and 2016, foreign capital purchases rose from 22% to 32% of total transaction volume. Data for 2017 year-to-date shows an even greater increase in foreign capital investments locally, with foreign investors contributing over half of all transaction volume through February, according to the report.

But it is unclear how long this consistent flow of foreign capital will last — especially as the answer may be at least partly influenced by politics. NGKF writes that:

Having already attempted to implement a travel ban on nationals from seven Muslim-majority nations, some asset owners are concerned that foreign investors looking to purchase investment-grade properties — particularly Middle Eastern firms — may turn their attention to countries that offer a more welcoming message.

Right now, foreign investors seem to be more interested in the market's long-term safety and the stability of returns and NGKF reports that foreign investors continue to view Washington positively. It anticipates that this trend will continue through the end of 2017 even as interest rates rise modestly.

“Compared with stocks and bonds, commercial real estate represents an attractive opportunity for institutional investors seeking consistent returns and a way to rebalance their portfolios,” the report concluded.