Tax reform benefiting commercial real estate industry

As the property industry continues to thrive in Massachusetts and elsewhere, some current or prospective investors may be wondering what exactly is driving the industry’s growth. The reality is that tax reform might be contributing to the recent increase in commercial real estate transaction volumes. Here is a glimpse at how the current tax situation is positively impacting the real estate world in Massachusetts and elsewhere.

According to experts, the current tax reform is expected to positively impact economic growth overall. However, it should be especially helpful for the commercial real estate industry. For those who own commercial property, tax reform is expected to increase revenue growth through more robust economic growth. It is also expected to draw additional capital into commercial real estate, with a lower tax rate translating into a higher risk-adjusted return. For instance, there is a brand-new 20 percent deduction for a pass-through entity that should make a building a wiser investment for those looking for cash flow.

In addition, opportunity zones that are newly established offer investors preferred tax treatment in communities that are economically distressed. Furthermore, investors can continue to take advantage of 1031 exchanges with the current tax bill. This is extremely helpful since these exchanges defer all capital gains tax on a certain property if an investor exchanges it for another. Again, these provisions should draw more money into commercial real estate and thus bolster the prices of properties.

In light of the current growth of the commercial real estate industry, it simply makes sense for investors to pay more attention to it than they perhaps have been. Fortunately, those who do not have much experience in this industry can take advantage of an attorney’s guidance when they are ready to navigate their first real estate transactions. An attorney’s ultimate goal when working with investors is to make sure that their best interests are upheld during each stage of their transactions in Massachusetts.