How a Government Shutdown Could Impact the Commercial Real Estate Market

This past weekend,  an impasse between democrats and republicans regarding how to allay budget concerns, was avoided at the last hour.  Without getting into a political blame game, this could have had dire consequences on the economy, which has an indirect impact on the commercial real estate market.  In addition, a government shutdown could have a drastic  and direct impact on the commercial real estate market as well.

This article from GlobeSt.com details the fears. While it doesn't point out direct ways a government shutdown could impact commercial real estate, it does talk about the impact a shutdown could have on the distressed debt and bankruptcy aspects of commercial real estate:

“The courts will slow down, if not cease altogether for the duration. The lack of judicial attention will negatively affect the market for distressed real estate and paper because, presumably, real estate deals in bankruptcy settings will be put on hold. So debtors and creditors may be unable to resolve their bankruptcy-related issues, and opportunistic buyers may miss some opportunities, or at least see them delayed.”

So what about some other ways a government shutdown could negatively impact the commercial real estate market?  First of all, all sales transactions of government owned buildings, which we wrote about recently here, would come to an abrupt halt.  As would all commercial lease transactions involving a government agency or government owned property.

In addition, there would be implications beyond the confines of the Washington D.C. real estate market, as far reaching as local businesses in rural settings. USDA loan guarantee applications and other government subsidy, government sponsored, or loan guarantee programs relating to commercial real estate would come to a screeching halt, which could delay the operations of many business.

Lastly, as the article briefly touches on, all the changes to financial and regulatory reform from the Frank-Dodd act wouldn't be set into motion, and technically speaking, the predatory acts of lenders and intermediaries could continue unchecked. No matter how you slice it, a government shutdown, of any meaningful length, would be brutal for commercial real estate…..unless of course we didn't have to pay property taxes…..