Inflation. Gas prices. Crime. Abortion rights.

These are some of the most pressing issues driving voters nationwide as they ponder the future of both chambers of Congress, weigh in on heated gubernatorial campaigns and consider local races and ballot measures that could reshape their communities.

Undoubtedly, these U.S. midterm elections are consequential, but for commercial real estate, there is really only one issue at play: the economy.

Still reeling from the aftereffects of the pandemic, the industry has faced one setback after another in 2022 — aggressively shifting consumer and workplace habits, multiple interest rate hikes that have dragged property values down 13% this year alone, and the acute pain of the highest inflation in 40 years.

As one lender said at a Bisnow event last month, “It’s a lack of trust, because we were all told that this inflation is transitory and it’s going to kind of go away … So I already had trouble trusting politicians, and now it’s even more.”

President Joe Biden’s approval numbers have sunk this year as Americans grow anxious about inflation and the perception of rampant crime across the country. Biden is currently on pace with his political rival and predecessor, President Donald Trump, who also had weak approval numbers at this point in his presidency — and succumbed to a “blue wave” after the 2018 midterm elections.

On Monday, the Dow Jones, S&P 500, and Nasdaq all rallied in anticipation of a potential Republican sweep, but nationwide polls have increasingly been difficult to rely on, with some polling experts claiming these midterms are literally unpredictable.

“We are, in many respects, stumbling through the dark with headlamps and flashlights,” Dave Wasserman, the U.S. House editor at the Cook Political Report, said this week. “And we have a vague understanding of where these races stand, but there are bound to be surprised.”

Whatever happens, here is what commercial real estate professionals should be looking out for as the results are tallied.

Congress

A unified federal government over the last two years has generated trillions in new spending, much of it with a direct impact on commercial real estate. With an eight-seat majority in the House of Representatives and Vice President Kamala Harris breaking the Senate’s 50/50 ties, Biden has signed the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act in the last two years.

While the narrow majority in Congress has cleared the way for significant investment into the country’s infrastructure and manufacturing and a shift toward renewable energy, it has also stymied Biden’s campaign promise to repeal CRE’s beloved carried interest loophole.

If Republicans take control of one or both houses of Congress, it is unlikely they will continue to approve big-ticket legislation pitched by the Biden administration. A federal government divided along party lines could also be less responsive to a recession.

The real estate industry has donated $83.9M to Republican candidates and committees in the 2022 election cycle compared to $68.6M to Democratic campaigns, but the industry’s donations to congressional races are far more closely split, according to OpenSecrets.org.

In races for the House of Representatives, real estate donors have given $90,600 to Republicans and $90,030 to Democrats after House Democrats outraised Republicans by more than $5K in 2020, according to OpenSecrets.

And while the real estate industry donated more than $487K to Republicans running for Senate in 2020 compared to nearly $286K to Democrats, Senate Democrats have outraised Republicans by more than $70K from real estate sources this year.

The largest industry donor — after the National Association of Realtors, which largely spends on nonpartisan issues — was Marcus & Millichap, which has spent more than $7.2M on Democrat campaigns and progressive groups. The second-largest donor is Hillwood Development, the firm founded by Ross Perot Jr., which has given almost $6.9M to Republican candidates and conservative organizations, according to OpenSecrets.

Gubernatorial Races

Residents of 36 states are casting their votes for governor Tuesday. In many, like Texas, California, Florida, Illinois, and Colorado, the incumbent is expected to win handily, which will mean business as usual for the commercial real estate industry — for better or for worse. In Georgia, Republican Gov. Brian Kemp is drawing donations from real estate players near and far and looks likely to hold off Democratic challenger Stacey Abrams again.

CRE players are hoping that will not be the case in New York, where the real estate-backed Republican Lee Zeldin is creeping up on Democratic incumbent Kathy Hochul in the polls.

Massachusetts will get a new governor one way or another, but real estate’s money is flowing to Democratic candidate Maura Healey over Trump-endorsed Republican Geoff Diehl. If Healey wins, it would be a shift in party control of the statehouse, but CRE players told Bisnow they wouldn’t expect a massive shift in real estate-related policy under her leadership. Her housing policy in particular has drawn praise from the industry.

In Maryland, real estate has largely thrown its hat in for Democrat Wes Moore, who is well up in the polls over Republican Dan Cox and is poised to become Maryland’s first Black governor. Experts told Bisnow real estate’s financial support of Moore may be more about currying favor from the clear front-runner than a true alignment of priorities, and many of Moore’s backers in real estate previously donated to outgoing Republican Gov. Larry Hogan.

Whether Pennsylvania votes for Republican candidate Doug Mastriano or Democrat Josh Shapiro may also determine whether abortion remains legal in the state, which could have an impact on economic development. Duolingo, for one, has said it would relocate its headquarters out of Pennsylvania if the state outlawed abortion. The polls favor Shapiro, who has said he would veto any state legislation that restricted access. Mastriano has said he supports a total ban.

Local Ballot Measures

California

     — Los Angeles mayoral race: Developer Rick Caruso (R) is taking on Karen Bass (D) to lead Los Angeles. Caruso has dramatically outspent Bass on the campaign trail and gained on her in recent weeks to bring them neck and neck in the polls. The real estate industry is largely behind its own, saying Caruso could bring a “fresh perspective” to the city and expressing support for his platform on homelessness and how his experience in development could be a benefit in tackling the housing shortage.

     — Proposition 30: This measure would fund electric vehicle infrastructure by raising the income tax rate on California residents earning more than $2M per year. About 45% of the money would go toward helping people buy EVs, and 35% would go toward installing chargers in commercial and residential real estate. The real estate industry is heavily opposed to the measure. Read more here.

     — Bay Area lodging taxes: Multiple cities in the San Francisco Bay Area have measures on their ballots to increase hotel taxes to pay for infrastructure improvements. Alameda, Millbrae, and Belmont have similar proposals to increase the tax rate and have seen little opposition, although one Alameda council member raised concerns that the region’s hospitality industry has not improved enough from the pandemic to take on new taxes at this time. Brisbane’s Measure O would impose a tax on hospitality business owners of $2.50 per day for every room booked. Read more here.

     — Proposition M: This measure would impose a tax on the owners of residences in San Francisco that sit vacant for 182 days or more per year. It is seen as a way to discourage real estate speculation and increase housing stock. Opponents come from both sides, with some saying the measure goes too far and some that it doesn’t go far enough to significantly address the severe home shortage in the city. Read more here.

     — Measure D or Measure E? San Francisco has two competing measures on the ballot aimed at streamlining the housing permitting and development process. The tech industry and San Francisco Mayor London Breed are behind Measure D, known as the Affordable Homes Now Initiative, which is seen as the more moderate proposal compared to Measure E, or the Affordable Housing Production Act. Both initiatives would reduce the timeline for approvals and eliminate the need for environmental reviews but differ in what percentage of units must be affordable in mixed-income projects and what percentage of area median income is required to be eligible. Read more here.

     — Measure ULA: Also known as United to House LA, this initiative proposes a tax on real estate transfers over $5M to fund new affordable housing and emergency housing interventions, such as legal aid for tenants facing eviction. The real estate industry is staunchly opposed and is dropping dollars to fight it, saying the measure would depress property values, decrease economic investment and ultimately drive rents higher. Read more here.

Maryland

     — Question 4: Maryland is one of five states voting Tuesday on legalizing recreational marijuana use. Nineteen states and Washington, D.C., have already approved recreational use, and an additional 18 allow medical use. Legalization has largely been seen as an area of opportunity for the real estate industry, though capitalizing on it isn’t easy.

Pennsylvania

     — City Council special election: After four of Philadelphia’s 17 city council members resigned in the last few months to run for mayor in 2023, the city called a special election to backfill their spots. The special election is seen as a way to shore up councilmanic prerogative, the unwritten policy of allowing council members to decide what developments do or don’t get approved in their districts without opposition from other members. The Democratic candidates picked by party leadership are all but assured victory — they will then face a general election next year — so the question is what the new council members will do, especially in terms of housing policy. Read more here.