NEW YORK CITY—“To call the changes 'sweeping' is an understatement, and yet it is still too early to say what the impact will be,” write Victor Calanog and Barbara Byrne Denham at Reis. Nonetheless, with passage of the Tax Cut and Jobs Act by both houses of Congress now a done deal—aside from a few minor points that the House will need to revisit—Reis' chief economist and senior economist, respectively, have charted some of the likely effects on commercial real estate in the near term.

The impact on homeownership by the bill's capping of deductions allowable from state and local income taxes and property taxes has been widely commented on over the past several weeks. However, while Calanog and Denham note that “this will hurt property values directly and will impact most single-family, co-op and condominium transaction values in all locales,” they add that the impact needs to be weighed against what homeowners get out of paying property taxes. They cite the affluent New Jersey suburb of Millburn, which features “some of the state's best primary and secondary schools,” as a locality that may be affected less than “other townships that have comparatively high property taxes, but without similar benefits.”

Calanog and Denham also predict less homeowner flight across state lines than within states. “High-tax urban locations that do not have the amenities to justify the high cost of living—made even higher by the inability of residents to deduct city taxes—will lose more people to the suburbs,” they write in a newly issued white paper. That potentially has favorable, although not uniformly positive, implications for commercial and multifamily owners in some suburban markets.