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Here’s what the real estate industry should know about the State of the Union address

By Caroline Brooks | Caroline.brooks@am.jll.com

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President Barack Obama delivered the 2015 State of the Union address on January 20, setting an ambitious agenda before Congress for the remaining months he's in office.

Among the President's top issues are tax policy, immigration reform, education, healthcare and of course, foreign policy. What's been top-of-mind for most Americans throughout the Obama Administration, also the underlying topic for his hour-long address, is the national economy.

"We have risen from recession freer to write our own future than any other nation on Earth," Mr. Obama said. "Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?"

A question worth considering as we all cringe at the thought of a next economic recession…

To break down what the President's State of the Union address means for commercial real estate, Real Views sat down with JLL's Director of Office Research John Sikaitis. Here's what he had to say:

An exceptionally strong corporate sector is propelling the nation's economy, fueling the highest job creation since the late 90s and contributing substantially toward higher-than-normal GDP growth due to reinvestment back into the economy. The stronger economy is boosting consumers' confidence: for the first time since 2007, they're reenergized by more employment options and the beginning of wage growth, and are operating within an economic environment where interest rates remain low and their dollar is going farther due to low inflation and 50 percent decline in energy prices.

From the real estate side, we have seen the highest demand levels in the office and industrial markets in nearly 10 years with vacancy at cyclical lows and development at cyclical highs, fueling jobs and greater contribution to GDP. Strong forecasts for the economy and real estate demand creates more capital than supply of product on the market, and sparks intense competition for real estate across property types in the capital markets realm.

But the reality is we could be experiencing higher growth even with just a bit of compromise. We are coming out of a period in which the least legislation was passed since the 1940s. As Senator Majority Leader McConnell has repeatedly said since the Midterms, Washington needs to get back to work and do their jobs, which is to legislate.

Key issues await the 114th Congress and Obama Administration. Among them are trade and tax policy reform, favored by Republicans, but Obama willing to compromise; infrastructure investment, favored by Democrats; energy initiatives, such as Keystone and removing ban on exporting energy, favored by Republicans; immigration reform, favored by Democrats; and investment in cybersecurity, which has bipartisan support.

If Washington gets back to work and Congress can compromise in the coming years, the level of 4-5 percent GDP growth and cyclical high absorption rates on the real estate side could be sustained the next few years with Government playing a part … as opposed to watching from the sidelines as has been the case in recent years.

To watch the full State of the Union address and share your thoughts, visit http://www.whitehouse.gov/sotu


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