The Election Effect

by | 29 September 2016

Election cycles always do strange things to the country. Short of a free Taylor Swift concert, there may be no recurring event that whips up such an emotional frenzy. In particular, this year’s election has presented a flurry of headline-grabbing dramas as well as clear reminders of the power the “election effect” and uncertainty can have on decision-making in the business world.

Bisnow recently noted that “the election itself is having a negative effect on growth, as companies and consumers are increasingly worried about its effect on the economy.” Indeed, I recently saw a business journal poll that shows that 60 percent of readers are waiting until after the election to make investment and hiring decisions. Within our world of commercial real estate, research suggests that office-using businesses may “delay signing new leases until the results of the vote are presented.”

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While arbitrage and currency traders literally profit from uncertainty and shifting expectations, many businesses struggle to set a course in the face of unknown outcomes. In many cases, long-term decisions regarding investment and expansion are simply put on hold until analysts can develop a clearer outlook. In turn, many managers work to ensure that the spending decisions that can’t be deferred are highly pragmatic. In other words, decisions need to save the company as much money as possible!

Penny wise, pound foolish

When the bottom line is a top focus, areas like property management might seem like candidates for cuts. After all, property management isn’t a direct revenue center and after initial setup, it’s not something that can easily be highlighted as a money saver. However, property management is one of those expenses that simply can’t be eliminated—even when everybody is tightening their belts.

Without capable property management, buildings fall into disrepair, contract costs increase and tenant satisfaction decreases. In addition, contracts always need to be re-bid, set points monitored and physical assets maintained. Investments in things like property management services can seem far more palatable when it’s clear that benefits can include higher quality tenants, longer service life from assets and even savings so dramatic that the service practically pays for itself.

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Staring down uncertainty to make wise decisions

There’s no doubt that Hillary Clinton and Donald Trump would be bound to make very different decisions as president. But beyond the question of who will be president, it’s important to remember that a lot can change over four years. Global events, technology innovations, social shifts and many, many more factors can impact the business environment. Just because these changes represent uncertainty doesn’t mean that prudent decision-making has to be put on hold.

Clients do seem to be looking for deals where they previously haven’t demonstrated such aggressive price sensitivity—perhaps a little bit of Mr. Trump’s business practices are rubbing off. While extreme cost-cutting is likely not the best answer, there may be an opportunity to better understand what is driving business decisions and find new ways to make sensible investments without sacrificing long-term strategy.

A mentor, a real estate executive and a mom, Karen spends time all over the map. If she isn’t traveling, Karen is busy with everything from IREM to Virginia Tech’s Real Estate program. When she has a few minutes to spare, she considers it a personal mission to find new homes for all of Lucky Dog Animal Rescue’s four-legged companions.