Rising Tailwinds Support CRE Recovery

By Hessam Nadji

As discussed in our last blog, the biggest threat to the U.S. economic recovery, and therefore the commercial real estate recovery, is the “fiscal cliff,” which encompasses the expiration of the Bush-era tax cuts as well as mandated federal spending cuts scheduled to take effect at the beginning of 2013. Left unchecked, the combination could deliver a blow to the U.S. economy equivalent to 4 percent of GDP. One can only assume or at least hope that the severity of the potential impact to the global economy will motivate lawmakers to act in a different and more progressive manner than the failed handling of the U.S. debt ceiling, which led to the downgrade of the country’s financial rating last year. The bottom line is that the already fragile recovery would most likely stall out altogether, potentially turning into an economic contraction, if the full impact of significant tax hikes and spending cuts occur simultaneously. While it appears that at least a short-term extension will likely follow the political elections, a substantive strategy to address these issues will evolve over time.

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