How 2025 Corporate Tax Cuts Will Affect REIT Tenants
The expected tax reforms of Donald Trump’s forthcoming presidency are leading to renewed hope in the real estate investment trust (REIT) sector. There are forecasts that individual tax cuts will expire in 2025, and possible decreases in corporate tax rates will inform economic growth. The 15% corporate tax rate for firms producing within U.S. territory proposed by Trump might lead to capacity expansion, with federal revenues projected to be down by $300b in the next decade.
Although REITs are not directly affected by corporate tax cuts because of pass-through taxation, tenants’ improved financial status could enhance rental income stability. The previous tax cuts are evidenced by S&P Global’s historical information, which depicts increased buybacks for the corporate entity.
Businesses could lease more incentives for expansion within the domestic market, and REITs like Realty Income, STAG Industrial, and EastGroup Properties could benefit from this situation.
Tariffs and Onshoring Trends
Other proposed tariffs, such as a 10% import tax and the recently proposed 60% on Chinese imports, have been highlighted because of their dual effect. Although they may raise the cost of consumer goods, they may also encourage foreign firms to set up regional affiliates in the United States.
Pershing Square’s Bill Ackman and other experts advise that this outcome could surge capital in the manufacturing sector and infrastructure projects in the U.S. REITs that focus on industrial and logistic buildings, including Prologis and Rexford Industrial Realty, may suffer in the short term but could benefit long-term from increased demand for warehouses and production facilities.
The onshoring trend caused by shocks in the global supply chain during the pandemic may lead to a continued growth cycle for REITs serving the industrial and manufacturing sectors.
Streamline Infrastructure Development
The Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, will address issues such as decreasing regulatory barriers and improving federal spending. This also entails targeting inefficiencies in infrastructure projects, such as prolonged environmental reviews on improving roads, bridges, and transit systems.
Regarding regulatory delays, the measures that DOGE would adopt might improve the construction duration and contribute to a better business climate. For REITs, this means sources of growth in segments that may be linked to the infrastructure market. Real estate associated with industrial, retail, and office should see an uplift due to firms venturing further in response to regulatory changes and tax incentives.
