A significant change in immigration policy under President-Elect Donald Trump could have a resounding effect across virtually every facet of the commercial real estate sector, said Marcus & Millichap national director of research and advisory services, John Chang.
To better understand how a more restrictive immigration policy would impact the market, Chang looked back at President Trump's first term in the White House, when he initiated some policies to mitigate illegal immigration that also affected legal immigration to the United States. Legal immigration dropped between 2017 and 2021 from a little more than 1 million per year when Trump took office, to 570,000 in 2019. That number fell even further in 2020 and 2021 due to the pandemic, said Chang. When President Biden took office in 2021, legal immigration trended back up and stood at 1.1 million total net migration in 2023.
Economic data showed that as legal immigration to the US fell, the labor shortage intensified, and as the labor shortage got worse, the pace of wage growth increased, which was inflationary, said Chang.
Under the second Trump presidency, immigration policy could affect commercial real estate if the policies weigh on legal immigration to the United States.
“It could put downward pressure on the unemployment rate and spur increased wage growth, and in specific areas of our economy, we would expect the impact to be outsized,” said Chang. “Overall, 19.3% of the US labor force is foreign-born, but the share of foreign-born workers is much higher in specific employment sectors.”
Thirty-seven percent of agriculture workers and 34% of construction workers are foreign-born, noted Chang. The food service and health care sectors also employ a large percentage of foreign-born workers.
“These types of businesses would likely be most impacted by restrictive immigration policies, and they're the segments of the economy that would likely face increased inflationary pressure that could mean higher development costs,” said Chang. “It could also pressure retail businesses, particularly service-oriented and experiential retail. Hospitality operations and investments could also be impacted, as well as seniors housing and medical services.”
The Federal Reserve will likely consider the risk of these potential inflationary forces when they set interest rate policies, and that could impact the cost of debt capital for all investors, he said.