In his article, “Debt Deadlock: Federal Budget Cuts Could Have Unintended Consequences for Commercial Real Estate,” Chris Macke starts out with a blanket question: What impact will federal budget cuts have on the private business sector, and by extension, the commercial real estate industry? He goes on to show that in years past, when federal spending has increased, that has led to a decrease in government payroll and a subsequent rise in private payrolls. This is because the government outsources many of its expenses to private businesses, with Booz Allen, Dell, Verizon, and IBM raking in the most money from private government contracts.
When government spending decreases, we can anticipate that these private businesses will be the first to feel the financial blow. Macke predicts that the lack of government investment in private business will have a trickle-down effect leading to a decline available funds to private business. This will inevitably lead to a decline in the commercial real estate industry, as business will have less money to devote towards commercial properties.
This dilemma gives rise to two more questions. Will corporate America pick up the slack and invest its own money in private businesses? And if so, will that be enough to offset the loss of government investment? This remains to be seen.
All of this is still speculative as we do not know when these government budget cuts will go into place, how much will be cut, and from where this money will be taken. There is a possibility that these cuts will not affect the commercial real estate industry. For any of those who are interested in investigating this matter further before making a real estate investment, feel free to contact us at Omni Realty Group with your questions and concerns.