REAL ESTATE NEWS

To say the least, the last 24 hours have been nothing short of engaging. Voters flooded the polls to cast their ballots on Election Day — determining who their next leaders will be — leaving CRE on edge in some areas across the country.

While there were major gubernatorial races in New Jersey and Virginia — none hit the national spotlight more than the New York City Mayoral race. As expected, Democratic nominee Zohran Mamdani was deemed the Mayor-elect of Gotham. While residential landlords have expressed concern about his policies, such as freezing the rent — the sector has accepted that this would be the fate for a while, according to Greg Willett, chief economist, at LeaseLock.

Jersey City Could Be a Big Winner

Now it remains to be seen if his policies will be implemented and that's what could cause some uncertainty in CRE, as opposed to a familiar face like former New York State Governor Andrew Cuomo taking over the financial capital of the world. Freezing rents could take some time. While the Mayor appoints members, it may take time to gain control of NYC's Rent Guidelines Board, which sets rates annually. Terms expire, typically ranging from two to four years. Jonathan Chambre, a senior director at Apprise by Walker & Dunlop, recently told GlobeSt that it could take a few years before a Mayor replaces everyone on the board.

"We can't overnight just change the policy," Willett told GlobeSt.

But he added, now that the results are official, it could lead to an immediate cool-off of investment going into NYC rent-stabilized buildings. Instead, interest could be redirected to other nearby local markets.

"I would say the big winner here in terms of investment and development might end up being Jersey City and some of those surrounding areas that are commuting distance into New York but are not subject to New York regulation," Willett predicted.

Status Quo Stays in Minneapolis

While all eyes were on New York — two other local Mayoral races were worth watching for local multifamily developers and landlords. One was in Minneapolis, where Jacob Frey was looking to win a third term as Mayor of the city. While he was facing a challenge from Democratic socialist Omar Fateh, who ran on rent stabilization, among other progressive policies, such as preventing evictions — Frey has been declared the winner, which was also expected. Under the incumbent, the residential sector has a sense of what to expect, according to Willett.

"I don't know that it's going to encourage development in Minneapolis, but it's not going to discourage development, which wouldn't guarantee that rent control would be put in place if [Frey] had lost, but probably that was the direction it was going," he explained.

Seattle Race Might be Most Impactful

However, one key Mayoral race remains up in the air. In Seattle, incumbent Mayor Bruce Harrell leads his challenger, Katie Wilson, by roughly seven points, as of midday, with under 50 percent of the vote in. The race has not yet been called and Willett thinks it could take a week before we know the winner and expects it to be close.

Wilson has campaigned on boosting renter protections and implementing a progressive tax system, which includes slapping a vacancy tax on property owners and reforming the capital gains tax.

"Of the three races, this is the one that actually might have the most legs and importance in other places because some of these policies could get put in place, and then you have other cities that mimic the route that Seattle might end up taking here," Willett said.

"If you have that very different tax environment within the city of Seattle versus if you went out to Bellevue or some other East Side suburbs that can really change the mix of what's happening in that marketplace."

But overall, even with the pending results from the Seattle Mayoral election and the Mamdani win — the multifamily sector appears to be showing cautious optimism about the short-term thanks to supply continuing to cool, according to Willett.

"I do think we're clearly going to have more products starting to change hands in the near term, and certainly some lower interest rates will facilitate that, he predicted.

"But also, we were just at the stage of the cycle where this product has to start moving again."

However, he did warn about one potential headwind — the economy. Yes, the Fed is cutting rates — but at the expense of a weak job market, while risking more inflation. So this is something worth watching.

Source: GlobeSt/ALM