The sunset is reflected in the windows of the US Capitol as a man runs on the National Mall in Washington, DC, on October 1, 2025, the first day of the US federal government shutdown.Andrew Caballero-reynolds | Afp | Getty ImagesA version of this article first appeared in the CNBC perty Play with Diana Olick.
perty Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies.
to receive future editions, straight to your inbox.When the government shuts down, real estate watchers tend to focus first on the impact to the residential market.
Potentially thousands of sales will be held up because the federal flood insurance gram is no longer able to issue new policies; the Federal Housing Administration, Department of Veteran Affairs and Department of Agriculture might slow or suspend their mortgage cessing; and the IRS might not cess tax transcripts or income verification documents as quickly.But the impact to commercial real estate, while not quite as immediate, is much more far-reaching.
A government shutdown delays government data on the economy. It causes uncertainty in the financial and, consequently, commercial real estate dealmaking, especially for small es.
It also hits investor confidence.
Finally, but most immediately, it causes a pullback in consumer demand for certain sectors.According to a post from the Commercial Real Estate Alliance (CREA), potential ramifications include:Reduced demand for CRE as es and government agencies delay or cancel leasing and development jects.Greater difficulty for CRE investors and developers to obtain financing and conduct transactions amid uncertainty and market volatility.Delayed apvals of permits or other government sign-offs necessary for CRE development jects.Get perty Play directly to your inboxCNBC's perty Play with Diana Olick covers new and evolving opportunities for the real estate investor, dered weekly to your inbox.
here to get access today.Economic dataThe government shutdown meant there was no release of the September monthly employment report from the Bureau of Labor Statistics.
That affects investors who need this kind of data to make decisions the state of the economy and interest rates.
If the shutdown continues, the Census Bureau will not release economic data on construction spending, housing starts and building permits.
Those are all key for multifamily investors.CRE financeMarket uncertainty leads to tighter credit from lenders and potentially higher risk premiums on deals, especially if they have anything to do with federal grams."Investors in general and lenders specifically look for stability, and when there's political instability, it always creates more caution making investment decisions and lending," said Ran Eliasaf, founder and managing partner of Northwind Group, a real estate private equity and debt fund manager.
"We think the biggest risk to underwrite is political risk.
It's true for the federal level, government shutdown, and it's true for local, the New York City mayoral election."Retail, hospitality, senior housingLooking at specific sectors, retail and hospitality will see the quickest impact because they are entirely consumer driven.
Consumer spending, especially in areas where there is a high concentration of federal workers, could drop as employees are furloughed or even laid off.
"I think that's a big risk," said Christine Cooper, chief U.S. economist and managing director at CoStar, a commercial real estate information and analytics firm.
"Think all the small retailers and coffee shops. They have very slim margins, so they're more ly to be disrupted if they lose their customers.
They won't be able to afford it, and you'll see some closures in pretty short order."It's a similar situation in hospitality, where closures in government services and at national parks will impact tourism.
Washington, D.C.'s tourism has already been hit by the administration's activation of the national guard and other federal troops.
This is just one more strike against the city.Skilled nursing facilities and senior care perties could also see deal delays. Those, along with affordable housing jects, use financing from the U.S.
Department of Housing and Urban Development (HUD). "I think [for] HUD financing, the queue will get longer.
Applications will not be cessed," said Eliasaf.Federal CREThe federal commercial real estate market will take the hardest hit, as sales of those perties, which are managed by the General Services Administration (GSA), will either be delayed or stopped.
Federal contracts, including new leases and perty maintenance agreements with tenants, will also have to wait. "It's going to impact dealmaking.
Definitely anybody that's negotiating a GSA lease, a government-backed lease, from the VA to even securing HUD financing is going to run into some issues right now," said Eliasaf.Depending on how long the shutdown lasts, REITs that cater to federal agencies, Easterly Government perties and JBG Smith that depend heavily on government rent payments, could be in hot water.
In an SEC filing earlier this year, Easterly said, "substantially all of our revenue is dependent on the receipt of rent payments from the GSA and U.S.
Government tenant agencies." ConstructionIf past shutdowns are any guide, the construction sector will be hit as well.
A report from ConstructConnect, an information and nology company for the construction industry, notes that the government shutdown in 2013 hit federally funded infrastructure jects, because permit reviews by the Environmental tection Agency stopped.
Contractors and trade specialists rely on those permits to mobilize crews.
And, the 2019 shutdown "froze billions of dollars in federal construction spending, stalled apvals for jects tied to the Department of Transportation, and disrupted bidding timelines, which squeezed subcontractors electricians, plumbers, and concrete specialists, who depend on predictable ject starts to manage labor, materials, and cash flow," according to the report.