How Washington’s deadlock could stall rate cuts - and what it means for commercial real estate

The latest vote in Congress has failed to break the deadlock, sending the U.S. federal government into shutdown mode once again. Each time Washington grinds to a halt, markets brace for impact. But while headlines often focus on political brinkmanship, memes, and sombreros, the story for commercial real estate is far less dramatic.

Shutdowns make waves in the broader economy, but the direct impact on commercial real estate tends to be minimal. Buildings continue to function, tenants continue to pay rent, and property managers keep the lights on. This is especially true for our medical office buildings, where healthcare operations are essential and largely immune to short-term political turbulence.

Yet, the ripple effects do matter particularly for interest rates. When government agencies close, the flow of critical economic data slows or stops entirely. Without updates from the Bureau of Labor Statistics, the Census Bureau, or the Commerce Department, the Federal Reserve is effectively flying blind, unable to make informed monetary policy decisions.

That uncertainty could disrupt the outlook for rates. The two additional interest-rate cuts anticipated for the final quarter of 2025 may now be delayed, which would ripple through capital markets and the cost of borrowing across all sectors, especially real estate.

Historically, shutdowns have caused short-term turbulence but limited long-term damage. The 2018–2019 impasse lasted 35 days and cost the economy roughly $11 billion, though much of that was later recaptured. The 2013 shutdown, at 16 days, reduced GDP by $20 billion. In both cases, commercial properties continued operating, but consumer confidence, home sales, and business sentiment softened temporarily.

This time, between 550,000 and 750,000 federal employees are expected to be furloughed. Each week of closure could trim 15–20 basis points off GDP growth, and if prolonged, the slowdown could spill into sectors tied to leasing demand and retail spending.

While most of our tenants remain unaffected, one of our medical buildings leased to the Veterans Association, a government tenant, has seen delays in rent payments during past shutdowns. These were administrative rather than financial setbacks, resolved once operations resumed. It’s a reminder that high-quality, long-leased real estate can absorb political noise with minimal disruption.

Commercial real estate remains a long-horizon asset class. Most lease agreements stretch across many years, ensuring stable cash flow even when Washington stalls.

Our Accretiv Hybrid Portfolio embodies this resilience. With a Weighted Average Lease Term (WALT) exceeding 10 years, income across our diversified industrial assets will be secured for the next decade. Even if rate cuts pause and Washington stalls, our buildings keep generating consistent income for investors.

For more information on how Accretiv Hybrid Portfolio provides durable, inflation-protected income through market cycles, visit www.orbvest.com.