Biden Anti-Competitive Executive Order Could Have CRE Impacts
The presidential executive order of July 9, 2021 to promote “competition in the American economy” was intended more to prevent anti-competitive activity by corporations.
“[W]hat we’ve seen over the past few decades is less competition and more concentration that holds our economy back,” said President Biden in afternoon remarks on the day he signed the order. “We see it in big agriculture, in big tech, in big pharma. The list goes on. Rather than competing for consumers, they are consuming their competitors.”
Multiple industries were called out in the order, one being real estate. When it “encouraged” the Federal Trade Commission chair to use rulemaking and statutory authority to “address persistent and recurrent practices that inhibit competition,” one mentioned was “unfair tying practices or exclusionary practices in the brokerage or listing of real estate.” That might be focused on resident real estate sales, as Michael Toth, general counsel of digital real estate startup REX argued in an opinion piece in the Wall Street Journal. Or maybe, given sharp competition for space that frequently favors larger companies with massive resources, the breadth of the concern could spread to the commercial realm.
CRE can’t assume safety any more than it could under Biden’s tax proposals that could increase capital gains taxes, end basis step-up, and finally put to bed the 1031 deferral.
In addition to direct attention are the possibilities of splash back from what happens to other industries, like possible restrictions on healthcare mergers, which could affect real estate practices in the industry.
“I’m wary about the federal government intervening in mergers and acquisitions between healthcare groups,” Ben Reinberg, CEO of Alliance Consolidated Group of Companies, a real estate investment firm that specializes in net-leased healthcare assets, tells GlobeSt.com. “This has the potential to dampen fair competition among our medical systems and could ultimately lead to the shuttering of some healthcare properties. There should of course be oversight for individual mergers. Broad directives like this, however, can discourage the very partnerships that allow healthcare to reach into the communities where folks live.”
Similar statements could be made about other industries like high tech, a major user of real estate, whether in office space, R&D, or industrial.
There are also hiring practices that could come under fire. Paul Lopez, COO and head of litigation at law firm Tripp Scott, tells GlobeSt.com that non-competes, which also came under criticism and interest in the executive order, are regularly found in the industry.
“At least here in South Florida, we certainly have seen real estate companies and real estate brokerage firms use non-competes, especially for their salespeople,” Lopez says. Companies should look at what really interests them—perhaps with a concentration on preventing someone who leaves from poaching clients or other employees.