• INTERVENTION & REGULATION
US – CALIFORNIA
Quantitative easing, state intervention, and overseas investment
“Any potential investment anonymity which formerly could exist through layered entity ownership is no longer possible” James Daneri, Blanchard, Krasner & French
James R. Daneri, Esq. Rachel E. Forster, Esq. Blanchard, Krasner & French, APC
Q2 What efforts has your jurisdiction taken to tackle inflation? By the end of Q1 2022, the Consumer Price Index (CPI) had increased 9.59% over the prior 12 months. The Fed’s reaction was to reverse course by increasing interest rates and transitioning its QE policy to a quantitative tightening. The Fed started lowering its balance sheet by pulling bond principal repayments out of circulation, all of which led to reduced CPI increases in 2023 and 2024. Efforts to combat inflation impacted U.S. CRE, which has experienced roughly a 30% slowdown in overall investment since 2022 and specifically a 20-25% decline in foreign investment since 2023. Higher debt costs, falling valuations due to reduced liquidity, and higher cap rates have served as major challenges to CRE borrowers and investors. U.S. interest rate policy will likely have a continued effect on long-term foreign investment trends. As rates have dropped since Q1 2024, commercial real estate investment has increased.
Real estate experts in the U.S. are advising investors to “survive until 2025”, as the commercial real estate (CRE) market grapples with numerous uncertainties including inflation, high interest rates, increased office vacancies, climate change, and a contentious presidential election. Q1 Has Quantitative Easing been a major factor in the U.S. and what affect has it had on Real Estate? After the U.S. housing bubble burst in 2008, the Federal Reserve slashed interest rates to reverse the economic recession and quantitative easing (QE) became policymakers’ last resort. In the wake of the Covid-19 pandemic, the Fed initially maintained its QE policy, which led to increased liquidity in U.S. financial markets and boosted certain sectors of the CRE market. Investment in industrial and warehouse properties saw a sharp rise in 2021 as did multi-family housing. As inflation began to rise at an alarming rate in the U.S. in 2022, the Fed shifted course on its monetary policy.
Rachel Forster has experience representing real estate investment groups, individual real estate investors (U.S. and Non-U.S.), developers, landlords and tenants. Recent transactions include purchases, sales, exchanges and financings for shopping centers, office condominiums, industrial, retail, and NNN single tenant properties, as well as private equity offerings for real estate groups utilizing the “Blocker” structure. Rachel works closely with the other real estate team members to provide clients with the expertise and attention necessary for real estate professionals to navigate the complexities of investment in U.S. real estate.
James R. Daneri is a tax attorney who focuses his practice on real estate, business and estate planning matters. He has extensive experience creating tax-efficient U.S. real estate development and investment structures as well as providing counsel on complex tax deferred real property exchanges and real property tax disputes. James also assists high net worth individuals and business owners on a wide range of transactional matters, including mergers and acquisitions, contracts, corporate governance, entity formation and maintenance, and succession planning. He holds a JD and LL.M. in Taxation from the University of San Diego School of Law and a BA from the University of California, Berkeley.
+1 (858) 551-2440 JDaneri@bkflaw.com www.bkflaw.com/team/james-daneri
+1 (858) 551 2440 rforster@bkflaw.com irglobal.com/advisor/rachel-e-forster
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