Business
What the government shutdown means for commercial real estate
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 Images
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When the government shuts down, real estate watchers tend to focus first on the impact to the residential market. Potentially thousands of home sales will be held up because the federal flood insurance program 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 processing; and the IRS might not process 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 markets and, consequently, commercial real estate dealmaking, especially for small businesses. 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 businesses and government agencies delay or cancel leasing and development projects.
- Greater difficulty for CRE investors and developers to obtain financing and conduct transactions amid uncertainty and market volatility.
- Delayed approvals of permits or other government sign-offs necessary for CRE development projects.
Economic data
The 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 about 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 finance
Market uncertainty leads to tighter credit from lenders and potentially higher risk premiums on deals, especially if they have anything to do with federal programs.
“Investors in general and lenders specifically look for stability, and when there’s political instability, it always creates more caution about 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, like government shutdown, and it’s true for local, like the New York City mayoral election.”
Retail, hospitality, senior housing
Looking 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 about all the small retailers and coffee shops. They have very slim margins, so they’re more likely 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 properties could also see deal delays. Those, along with affordable housing projects, 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 processed,” said Eliasaf.
Federal CRE
The federal commercial real estate market will take the hardest hit, as sales of those properties, which are managed by the General Services Administration (GSA), will either be delayed or stopped. Federal contracts, including new leases and property 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, like Easterly Government Properties and JBG Smith that depend heavily on government rent payments, could be impacted.
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.”
As for the current shutdown, an Easterly spokesperson said, “In past instances, our tenants continued to operate because their work is considered essential to national security, law enforcement, and public health. Our portfolio is deliberately concentrated in these mission-critical facilities, and our long-term, binding leases ensure that rental obligations remain in place.”
Construction
If past shutdowns are any guide, the construction sector will be hit as well. A report from ConstructConnect, an information and technology company for the construction industry, notes that the government shutdown in 2013 hit federally funded infrastructure projects, because permit reviews by the Environmental Protection 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 approvals for projects tied to the Department of Transportation, and disrupted bidding timelines, which squeezed subcontractors like electricians, plumbers, and concrete specialists, who depend on predictable project starts to manage labor, materials, and cash flow,” according to the report.
NEW DELHI: Prime Minister Narendra Modi on Wednesday made a pitch to boost investments in manufacturing in the country, saying, it is the “best time to invest, innovate and make in India”, which should be positioned as a “trusted partner” in the global supply chain. The statement comes when India faces tariffs headwinds from the US, while looking at striking trade agreements and global alliances for pushing the export economy.PM Modi said that led by technologies, such as 4G and 5G in telecom, digital and internet have emerged as the backbone of the country. “Cost of one GB wireless data in India is now lower than price of a cup of tea… (and) India ranks among leading nations in per-user data consumption, signifying that digital connectivity is no longer a privilege or luxury but an integral part of everyday life,” the PM said as he inaugurated 2025 edition of the India Mobile Congress (IMC).Speaking to a gathering of domestic and global business leaders, including Reliance Jio chairman Akash Ambani, Airtel chief Sunil Mittal, and a large number of startups and new-age deeptech companies, Modi said India is today leading with a mindset that is focussed on expanding industry and investment.“India Mobile Congress and India’s success in the telecom sector reflect the strength of the Atmanirbhar Bharat vision,” Modi said, recalling how the idea of ‘Make in India’ was once “mocked by skeptics who doubted India’s ability” to produce technologically-advanced products, citing delays of decades in adopting new technologies during earlier regimes. “The nation has responded decisively. The country, which once struggled with 2G now has 5G coverage in nearly every district. Electronics production has increased six-fold since 2014, mobile phone manufacturing has grown 28 times, while their exports have surged 127 times.”He said govt has been taking steps to make it easier for corporates to invest and expand. “The country’s democratic setup, govt’s welcoming approach, and ease of doing business policies have established India as an investor-friendly destination…”
The Hollywood Burbank Airport air traffic control tower stands in Burbank, California, on Oct. 6, 2025.
Mario Tama | Getty Images
A shortage of air traffic controllers could delay more flights, the Federal Aviation Administration warned on Wednesday, as concerns grow about the effect of the government shutdown on U.S. aviation.
About 10,000 flights were delayed on Monday and Tuesday, though disruptions dropped on Wednesday to just more than 1,900. A shortfall of already-thin air traffic control staffing this week had prompted the FAA to slow or halt arrivals in Burbank, California, and Nashville, Tennessee, among others.
Transportation Secretary Sean Duffy warned Monday that the FAA is seeing a “slight uptick” in sick calls of air traffic controllers.
The shutdown is exacerbating concerns about the strain on air traffic controllers, a shortage of whom has vexed airline executives for years.
“Nearly 11,000 fully certified controllers remain on the job, many working 10-hour shifts as many as six days a week, showing extraordinary dedication to safely guiding millions of passengers to their destinations—all without getting paid during this shutdown,” the air traffic controllers’ union, the National Air Traffic Controllers Association, said in a statement.
Earlier Wednesday, the FAA had warned there could see a staffing trigger at Newark Liberty International Airport, but that caution had been removed by the afternoon. Newark was not seeing an influx of flight delays.
The government shutdown stretched into its eighth day Wednesday, as the Senate failed to pass a funding proposal again.
During a shutdown, “essential” workers such as air traffic controllers and TSA agents are continuing to work without pay, while many other employees are placed on furlough.
A more than monthlong shutdown that started in late 2018 ended early the next year, hours after a shortage of air traffic controllers snarled air travel in New York.
The FTSE 100 hit new heights on Wednesday, boosted by gains in miners as the price of gold surpassed 4,000 dollars an ounce for the first time.
The FTSE 100 index closed up 65.29 points, or 0.7%, at 9,548.87, a new closing peak. It had earlier set a new intra-day best level of 9,577.08.
The FTSE 250 ended up 39.03 points, 0.2%, at 22,041.83, but the AIM All-Share closed down just 0.30 of a point at 796.07.
Gold traded at 4,044.28 dollars an ounce on Wednesday, up against 3,985.98 dollars on Tuesday, taking year-to-date gains to 54%.
It passed the 3,000 dollars milestone in March, just ahead of US President Donald Trump’s liberation day tariffs that sparked uncertainty and volatility on financial markets.
Gold has previously passed 2,000 dollars during the Covid-19 pandemic and 1,000 dollars during the global financial crisis back in March 2008.
Deutsche Bank’s Henry Allen pointed out that, as it stands, gold remains well on track for its strong annual increase since 1979, when the oil shock that year led to a huge surge in inflation.
Gold is traditionally seen as a safe port in a financial market storm.
But Russ Mould, investment director at AJ Bell noted gold’s strong performance this time around has, unusually, come at a time of strong market performance.
“Traditionally, investors would load up on the shiny stuff when markets look gloomy, not when they’re motoring ahead. It shows that investors are hedging their bets,” he said.
On the FTSE 100, gold miners Endeavour Mining and Fresnillo rose 2.7% and 3.0% respectively.
Another miner in the green was Anglo American which climbed 3.2% as Berenberg upgraded to ‘buy’ from ‘hold’, believing its deal with Teck Resources “will result in Anglo American shares continuing to outperform”.
Lloyds Banking Group climbed 3.7%, after the Financial Conduct Authority said the cost from car finance mis-selling would be at the lower end of its prior expectations.
The UK’s finance regulator said car finance mis-selling will cost providers around GBP8.2 billion, with an additional GBP2.8 billion of administrative costs, taking the total to GBP11 billion.
The UK’s financial regulator had previously estimated that the total cost of compensation could range from £9 billion to £18 billion.
Davy Research said the FCA review should be “well received as it further narrows the potential outcomes to the lower end of its initial range”, although it stressed “uncertainty remains”.
Other car finance providers were mixed. Close Brothers rose 5.4% and S&U PLC firmed 2.4% but Vanquis Banking fell 2.0%.
On the FTSE 250, Unite Group fell 10% after reporting beds sold for the 2025 to 2026 academic year fell to 95.2% from 97.5% the year prior, below its expectations.
Rental growth from the sales to date amounted to 4.0%, down from 8.2% a year ago.
Nonetheless, the company reiterated financial 2025 guidance for adjusted earnings per share of 47.5 pence to 48.25p, compared with 46.6p in 2024.
“We have sold 95% of beds and delivered rental growth of 4.0%. While this is slightly below our target, we saw a strong clearing period which has contributed to our outperformance of the wider (purpose-built student accommodation) sector,” said Joe Lister, Unite Students chief executive officer.
Tim Leckie, analyst at Panmure Liberum, said: “Citing outperformance versus the wider PBSA sector feels like a story we’ve heard before and investors may worry about buying the best house on the worst street.”
In economic news, the Office for National Statistics revised down UK government borrowing figures for the current fiscal year by £2 billion following an error in the tax receipts used to calculate the data.
The ONS said that HM Revenue & Customs had alerted it to inaccuracies in value-added tax receipts, the statistics agency relied on for its estimates for government borrowing published on September 19.
As a result of the errors, which cover the period from January to August this year, the ONS cut its estimate for government borrowing for the current fiscal year, which began in April, by £2 billion. It also reduced the borrowing figure for the previous fiscal year by £1 billion.
Correcting for the errors, the ONS said borrowing for the fiscal year to August was £81.8 billion, down from the £83.8 billion initially reported in its September 19 release.
The total is still above the £72.4 billion forecast for the period by the Office for Budget Responsibility, the UK’s official fiscal watchdog.
The pound was quoted lower at 1.3406 dollars at the time of the London equity market close on Wednesday, compared with 1.3440 dollars on Tuesday. The euro stood at 1.1615 dollars compared with 1.1672 dollars. Against the yen, the dollar was trading at 152.68 yen, higher compared with 151.02 yen.
In European equities on Wednesday, the CAC 40 in Paris leapt 1.2% and the DAX 40 in Frankfurt ended up 1.0%.
Stocks in New York were higher at the time of the London close. The Dow Jones Industrial Average was up 0.3%, the S&P 500 index was 0.5% higher and the Nasdaq Composite advanced 0.7%.
The yield on the US 10-year Treasury was quoted at 4.12%, narrowed from 4.13% on Tuesday. The yield on the US 30-year Treasury stood at 4.71%, trimmed from 4.73%.
Technology stocks climbed once on Wall Street shrugging off fears about AI profitability and concerns of a market bubble.
The Bank of England’s Financial Policy Committee thinks the risk of a “sharp correction” in the financial markets has increased.
The minutes of the FPC’s latest meeting read: “On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence.”
But Peter Oppenheimer at Goldman Sachs said while there are elements of investor behaviour and market pricing currently that rhyme with previous bubbles, there are key differences this time around.
“First, the appreciation of the technology sector has, so far, been driven by fundamental growth rather irrational speculation about future growth.
“Second, the leading companies that have seen the strongest returns have unusually strong balance sheets.
“Third, the AI space has, so far, been dominated by a few incumbents; most bubbles form in a period of huge competition as both investors and new entrants flock into the space.”
Brent oil traded at 66.40 dollars a barrel on Wednesday, up from 65.28 dollars late on Tuesday.
The biggest risers on the FTSE 100 were Antofagasta, up 113.0 pence at 2,793.0p, Lloyds Banking Group, up 3.08p at 86.38p, Anglo American, up 91.0p at 2,900.0p, Haleon, up 10.5p at 340.8p and Fresnillo, up 68.0p at 2,368.0p.
The biggest fallers on the FTSE 100 were ICG, down 96.0p at 2,176.0p, Segro, down 20.6p at 647.2p, Spirax, down 160.0p at 6,960.0p, Croda, down 49.0p at 2,823.0p and LondonMetric, down 2.5p at 180.6p.
Thursday’s global economic calendar sees German trade data and the Bundesbank’s monthly report.
Thursday’s UK corporate calendar has half year results from specialist finance provider S&U and a trading statement from Upper Crust owner SSP.
Contributed by Alliance News
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