- House Passes Return-to-Office Bill for Federal Workers
- EPA Invites Comments on Proposed Label for Low-Carbon Buildings
- Office Sector Shows Economic Stress, NAIOP Releases Report on CRE’s Economic Contributions
House Passes Return-to-Office Bill for Federal Workers
The House of Representatives passed legislation this week requiring all federal agencies to revert to pre-pandemic telework office arrangements and allow employees 30 days to return to their offices. (GovExec, Feb. 1 and The Hill, Feb. 2)
SHOW UP Act
- House Oversight Committee Chairman James Comer (R-KY)—the lead sponsor of the Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act—said it is urgent that federal employees get back to their offices. (Video of Comer’s House floor statement and news release, Feb. 1).
- Rep. Comer also noted that the cost of federal leases in Washington, D.C. is also motivating return-to-office calls for government employees. “If we’re not going to use those buildings for federal workers, then the federal government may look at doing something different with those buildings.” (Federal News Network, Jan. 30 and Roundtable Weekly, Jan. 6)
- CoStar’s reporting on the bill’s passage noted The Real Estate Roundtable’s December letter to President Biden, which cited the negative impact of underutilized office space on local communities. (CoStar, Feb. 2 and Roundtable letter, Dec. 12)
- The Roundtable comments also encouraged President Biden to support legislation that could help facilitate “the increased conversion of underutilized office and other commercial real estate to much-needed housing.” (Roundtable Weekly, Dec. 16)
- Meanwhile, New York City Mayor Eric Adams plans to encourage the conversion of aging office buildings to apartments by changing zoning restrictions that limit adaptive uses of CRE in a specific swath of Manhattan. (GlobeSt, Jan. 30)
- Mayor Adams’ efforts to convert outdated office space to other potential uses, especially housing, are based on a recent task force report, the New York City Office Adaptive Reuse Study.
- The Democrat-controlled Senate is unlikely to take action on the House-approved SHOW UP Act. (PoliticoPro, Feb. 1)
- Meanwhile, the White House announced this week that COVID-19 emergency declarations will end on May 11. It is unclear how the federal government’s pandemic response shift will impact remote work arrangements for government and private sector employees. (Forbes, Jan. 31 and White House Statement of Administrative Policy, Jan. 30)
The Roundtable will continue to focus on return-to-office policies as part of its 2023 policy agenda as remote work continues to take an economic toll on cities and tax bases throughout the nation.
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EPA Invites Comments on Proposed Label for Low-Carbon Buildings
The Environmental Protection Agency (EPA) opened a comment period this week on its proposed ENERGY STAR NextGen certification, a voluntary public-private partnership program that would recognize low-carbon buildings. (EPA’s NextGen webpage)
- The proposed NextGen label builds on EPA’s successful ENERGY STAR Commercial Buildings program that recognizes high-performing real estate assets. More than 39,000 buildings have earned EPA’s ENERGY STAR certification to date.
- EPA discussed its proposal at The Roundtable’s Sustainability Policy Advisory Committee (SPAC) meeting last week in Washington and again on a webinar this past Tuesday. (SPAC slide presentation, Jan. 25 and Roundtable Weekly, Jan. 27)
- EPA proposes that a building would need to meet three (3) criteria to earn NextGen certification:
1.) Demonstrate High Energy Efficiency
Building is ENERGY STAR certified and has a score of “75” or higher on EPA’s rating scale.
2.) Renewable Energy Use
Building must obtain at least 30% of the total energy it consumes from renewable sources through any combination of (a) onsite renewable generation, (b) renewable energy certificates (not “offsets”), (c) biofuels or other renewable fuels, or (d) renewable thermal certificates.
3.) Onsite Emissions Target
Building must meet a greenhouse gas emissions target unique for its asset class that is also “normalized” by regional weather conditions through a metric known as “heating degree days.”
- Comments are due to EPA by March 2. (Comments Submission Form).
- SPAC has formed a working group to develop The Roundtable’s comment letter.
EPA aims to make ENERGY STAR NextGen certification available in early 2024.
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Office Sector Shows Economic Stress, NAIOP Releases Report on CRE’s Economic Contributions
Trends in real estate capital and credit markets were the focus of a joint session of The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee on Jan. 24 during RER’s State of the Industry Meeting in Washington.
- Research Committee Co-Chairs Paula Campbell Roberts (KKR), above left, and Spencer Levy (CBRE), right, led a discussion on market conditions and the economic outlook. Their findings suggest that the industry is facing challenges from shifting property fundamentals, rising rates, upward pressure on cap rates, and contracting credit capacity. (Download the slide presentation)
- Other recent reports support the RECPAC-Research presentation, including one from CoStar that shows tightening credit conditions in the sector. “The office market is showing signs of weakness due to weak demand, driving higher vacancy rates and deteriorating operating performance, as well as challenging economic and capital market conditions,” said Mike Santomassimo, chief financial officer of Wells Fargo. He added that the bank is “… making sure we’re being proactive with our borrowers to make sure we’re thinking way ahead of any maturities or extensions, options that need to get put in place to help manage through it.” (CoStar, Jan. 18)
- A report from Moody's Analytics suggests that approximately $17 billion worth of mortgage bonds backed by office assets will come due in 2023, compared to $7 billion in 2022 and $4 billion in 2021. Victor Calanog, Moody’s head of commercial real estate economics told The Business Journals that the key issue for today’s office inventory is demand, due to the long-term effect of remote work and initiatives to increase adaptive use. (Washington Business Journal, Jan. 18)
- The office paradigm shift is analyzed in a market risk assessment study of 11 metropolitan statistical areas released yesterday by Trepp and Compstak. Their findings show that a total of $40.7 billion in loans are scheduled to mature by the end of 2024. In addition to loan statistics, the report reviews leasing trends and headwinds. (Trepp/Compstak, Feb. 2)
CRE’s Economic Contribution
- NAIOP, the Commercial Real Estate Development Association, released a research study on Jan. 26 on the Economic Impacts of Commercial Real Estate for 2022.
- The report analyzes the combined economic contributions of new commercial building development and the operations of existing commercial buildings in 2022. The NAIOP Research Foundation publication positive impacts on the U.S. economy, including:
- $2.3 trillion to U.S. gross domestic product (GDP)
- $831.8 billion in personal earnings
- 15.1 million jobs
Economic Impacts of Commercial Real Estate is authored by Brian Lewandowski, Adam Illig, Michael P. Kercheval, Ph.D., and Richard Wobbekind, Ph.D., at the University of Colorado Boulder Leeds School of Business.
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