Category: News

Commercial Real Estate Leaders Report Improving Market Conditions Amid Uncertain Return-to-Office Trends

Posted on by Trey Jackson

Q3 2021 Sentiment Index Chart

Commercial real estate executives report improving market conditions, through consistent growth of various asset classes, despite uncertainty surrounding employees returning to the office, according to The Real Estate Roundtable’s Q3 2021 Economic Sentiment Survey released today. The report shows the continued positive momentum for industrial, multifamily and single-family assets, with hospitality continuing to improve with increased travel. 

Market Conditions

  • “As the commercial real estate industry continues to adapt in the face of the global pandemic, we recognize the changing demands and expectations for hospitality, shopping centers, office buildings, travel and convening spaces,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Strong, stable and growing real estate markets can be a driving force for the nation’s economic recovery, and contribute productively to a world struggling to overcome COVID and its variants. Investment in these reimagined spaces presents the opportunity to move the economy forward for the benefit of all Americans.”
     
  • The Roundtable’s Q3 Current Conditions Index of 85 increased 7 points from the previous quarter, the highest index recorded in its thirteen year history.
     
  • The Economic Sentiment Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. The Roundtable’s Overall Q3 2021 Sentiment Index registered at 78 – a one-point increase from the previous quarter. 
     
  • The Roundtable’s quarterly survey shows that 89 percent of respondents believe that general market conditions today are “much better or somewhat better” versus one year ago – with an abundance of available capital compared to one year ago.
  • However, this quarter’s Future Conditions Index of 71 decreased 4 points compared to last quarter, indicating uncertainty still remains while the country continues to recover from the COVID-19 crisis.

Topline Findings:

Chicago skyline upward

  • The Q3 2021 Real Estate Roundtable Sentiment Index registered a score of 78, an increase of 1 point from the second quarter of 2021 and a 36-point increase over Q3 2020. The speed of the economic recovery compared to only 6 months ago has provided more clarity and certainty for specific asset classes, with the biggest looming question marks being the impact of employees returning to the office and rising inflation risk.
     
  • Industrial performed exceptionally well throughout the pandemic and has maintained positive momentum through the first half of 2021. Additionally, multifamily and single-family suburban assets continue to attract strong demand. Previously challenged assets such as hospitality have rebounded and remain hopeful to reach pre-pandemic levels with increased travel and employees returning to the office.
     
  • Assets classes with durability or the perception of durability such as high-quality multifamily, long-term net lease office, and industrial have all hit record levels, all while certain sectors and regional markets (in particular, those relying heavily on mass transit) have yet to fully recover.
     
  • Respondents cited a continued abundance of available debt and equity capital, which has led to significant amounts of capital sitting on the sidelines waiting for attractive deployment opportunities.
  • DeBoer also noted, “Historically, the real estate industry has played a pivotal role in catalyzing economic recovery following national and worldwide events, and we have the opportunity to play that role again. With the recent infrastructure policy developments in Washington, it is a once-in-a-generation opportunity to rebuild cleaner, safer, and more climate-friendly buildings. With private capital readily available for investment, we are hopeful federal and public private partnerships will continue to fuel job creation and equitable economic development needed to continue the progress made in the economic recovery.”

Data for the Q3 survey was gathered in July by Chicago-based Ferguson Partners on The Roundtable’s behalf.  For the full Q3 report, visit here.

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2021 Annual Report – Meeting Today’s Challenges & Shaping Tomorrow’s Opportunities

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View Full Report – 2021 Annual Report – Meeting Today’s Challenges & Shaping Tomorrow’s Opportunities

National Policy Issues Dominate Roundtable Annual Meeting; John F. Fish Succeeds Debra A. Cafaro as Roundtable Chair

Posted on by Trey Jackson
2021 Annual Roundtable Meeting image

National lawmakers and industry leaders this week discussed a wide range of policy issues – including cybersecurity, infrastructure, climate, taxes, and post-pandemic reopening of businesses – during The Real Estate Roundtable’s 2021 Annual Meeting, where John F. Fish (Chairman and CEO, Suffolk) was elected as Roundtable Chair, effective July 1. (Watch Incoming Chair Fish’s remarks) 

Leadership:

Policy Issues & Featured Speakers  

  • Sen. Chris Coons (D-DE) discussed the administration’s infrastructure proposal, aid for low-income renters, and more.
  • Sen. Ben Sasse (R-NE) focused on bipartisan congressional efforts on infrastructure, return-to-work issues, and national security threats.
  • White House National Climate Advisor Gina McCarthy, above, and Roundtable Sustainability Policy Advisory Committee Chair Tony Malkin (Chairman, President and Chief Executive Officer, Empire State Realty Trust) focused on the commercial real estate industry’s role in climate policy. (watch the discusssion)
  • Rep. Stephanie Murphy (D-FL) discussed tax policies that could encourage economic recovery and avoid unintended consequences.
  • “Current Market Challenges and Coming Opportunities” – above – featured the following industry leaders in a discussion on challenges facing markets during a recovering economy, reopening strategies, and cybersecurity concerns for CRE: (watch the discussion)
    • Thomas M. Flexner (Vice Chairman and Global Head of Real Estate, Citigroup)
    • Kathleen McCarthy (Global Co-Head of Blackstone Real Estate)
    • Mark J. Parrell (President & Chief Executive Officer, Equity Residential) and
    • Owen D. Thomas (Chief Executive Officer, Boston Properties)

Policy Advisory Committees

  • Sustainability Policy Advisory Committee (SPAC) – above
    The outlook for energy efficiency legislation was a focus of discussion with key Hill staff representing Senator Jeanne Shaheen (D-NH). Additionally, officials from the Department of Energy’s Better Buildings initiative and the Environmental Protection Agency’s ENERGY STAR program updated SPAC.  
  • Research and Real Estate Capital Policy Advisory Committees (RECPAC)
    Sen. Steve Daines (R-MT) discussed the importance of enacting measures to encourage job creation and pro-growth tax policy, and the importance of developing a clear strategy to address global and national security threats, including cyber and ransomware attacks.
  • Tax Policy Advisory Committee (TPAC)
    Tax legislative priorities affecting CRE were the focus of discussion with congressional staffers – including proposals to eliminate or limit the use of carried interest and Like-Kind Exchanges, along with increasing the capital gain rate.
  • Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG)
    This joint meeting was briefed on “Civil Unrest: Challenges for Communities” by Terry Monahan, Senior Advisor for Recovery and Safety Planning for New York City – and an FBI official discussed the current threats of ransomware and cyber challenges.

The Roundtable’s 2021 Annual Report will be distributed in July. Next on The Roundtable’s Meeting Calendar is the Oct. 5 Fall Meeting in Washington, DC. (Roundtable-level members only)

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Policy Updates – RER YouTube Channel

Posted on by Trey Jackson

The Real Estate Roundtable’s YouTube Channel

May 28, 2021 – Real Estate Like-Kind Exchanges Congressional Briefing

April 19, 2021 – Discussion with John Anzalone – Partner, ALG Research 

April 12, 2021 – Interview – Robert S. Kaplan, President and CEO, The Federal Reserve Bank of Dallas

January 28, 2021 – A Conversation on Leadership – Penny Pritzker – Former U.S. Secretary of Commerce

January 27, 2021 – Leading on Tax Policy – Sen. Ron Wyden (D-OR) – Chairman, Senate Finance Committee

January 27, 2021 – Interview – Sen. Sherrod Brown (D-OH), Chairman of the Senate Banking, Housing, and Urban Affairs Committee

January 25, 2021 – Finding Unity – An Interview with Sen. Joe Manchin (D-WV) 

2020

October 5, 2020 – Listening Session with EPA Administrator Andrew Wheeler

September 22, 2020 – FY 2021 Nominations for the Board of Directors – Fall Roundtable Meeting

September 22, 2020 – Emerging Global Real Estate Investment Trends Panel-Fall Roundtable Meeting

September 22, 2020 – The Roundtable’s Equity, Diversity, and Inclusion Committee – Fall Roundtable Meeting

September 21, 2020 – A View from the Senate – Interview with Sen. Tim Kaine (D-VA)

September 21, 2020 – Prospects for a Pandemic Risk Insurance Act – Rep. Steve Stives (R-OH)

September 21, 2020 – Senate Majority Leader – Sen. Mitch McConnell (R-KY)

September 9, 2020 – Testimony and Q&A – Jeffrey DeBoer – The Status of the Federal Reserve Emergency Lending Facilities

September 4, 2020 – Bisnow Interview – Jeffrey DeBoer On His Game Plan To Push The CRE Agenda Before The Election

July 30, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – Walker Webcast – All Eyes On Washington: What will the next stimulus bill do for CRE?

July 24, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – Interview with Rep. Darin LaHood (R-IL)

July 10, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – Public Policy in the Age of COVID: Shaping the CRE Recovery 

May 14, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – National Economic Policy Responses to the COVID-19 Crisis

May 6, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – Interview with Dr. Joseph Gardner Allen, Assistant Professor with the Harvard T.H. Chan School of Public Health

May 5, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – “The Policy Response to COVID-19: Implications for Real Estate” – hosted by the Pension Real Estate Association (PREA)

May 1, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert – Unpacking the Federal Stimulus – Bisnow Webinar

April 21, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert

April 10, 2020 – The Real Estate Roundtable COVID-19 Economic Crisis Alert 

April 3, 2020 – The Real Estate Roundtable’s COVID-19 Economic Crisis Alert 

 

 

Congress Reviews Biden’s Multitrillion Infrastructure Proposals

Posted on by Trey Jackson

President Biden Speaks at Amtrak Anniversary

Capitol Hill continued to assess President Biden’s “physical” and “social” infrastructure plans this week as Democrats considered how to advance the Administration’s proposals in a narrowly divided Congress. (BGov, May 4)  Photo: President Biden on April 30th discussed his infrastructure proposals during Amtrak’s 50th anniversary.

Infrastructure Negotiations 

  • Biden’s infrastructure proposals include last week’s $1.8 trillion American Families Plan, composed mainly of social spending and tax hikes on wealthy individuals – and his $2.3 trillion American Jobs Plan unveiled in March. (Roundtable Weekly, April 30 and Wall Street Journal, April 29).  
  • Senate Minority Leader Mitch McConnell (R-KY) on Monday said Republicans are open to funding projects that fit into a much narrower definition of infrastructure, for a much smaller cost, and funded by unspecified fees rather than tax increases. (AP, May 3)
  • “We’re open to doing a roughly $600 billion package, which deals with what all of us agree is infrastructure and to talk about how to pay for that in any way other than reopening the 2017 tax reform bill,” McConnell said.
  • White House Press Secretary Jen Psaki on May 5 said Biden plans to meet with key policymakers on his proposals next week, including Sen. Shelley Moore Capito (R-WV), ranking member on the Environment and Public Works Committee. “The president believes Congress can and should move forward with multiple policies at the same time. And, certainly, that is what is happening on Capitol Hill.” Psaki said. (White House press briefing, May 5 and Transport Topics, May 6)
  • CNBC reported on May 6 how residential and commercial real estate could be affected by Biden’s tax proposals, which would raise capital gains taxes, tax unrealized gains at death with an exception for family-owned businesses, and restrict the use of Section 1031 like-kind exchanges.
  • The Wall Street Journal on May 6 also reported how Biden’s proposal to restrict 1031 exchanges would add another burden on farmers, who have used the provision to relocate operations, diversify crops, and consolidate land holdings. 

Congressional Legislation

Capitol Building with sun

  • This week, Congress considered legislation that would impact issues of interest to commercial real estate, including:
  • The House Energy Committee addressed the CLEAN Future Act (H.R.1512) during a hearing focused on decarbonizing the transportation sector.  H.R. 1512 is a sprawling bill aimed at achieving net-zero greenhouse gas emissions by 2050 that contains provisions affecting building construction, operations, and ESG reporting. (Politico, March 3 and CQ News, Reuters, March 2)
  • A May 4 House Financial Services Subcommittee hearing addressed the National Flood Insurance Program (NFIP). A discussion draft released before the hearing would reauthorize the NFIP for five years, enact reforms to place the program on sound financial footing, institute a cap on premium increases of 9% per year, and forgive over $20 billion in NFIP debt. (Committee background memorandum)
  • In the Senate, legislation is expected to be reintroduced in the next few weeks that would encourage the construction of more energy-efficient new homes and commercial buildings through voluntary “model” building codes. Sens. Jeanne Shaheen (D-NH) and Rob Portman (R-OH) issued a May 3 news release on their plans to reintroduce their energy efficiency legislation. 

House Appropriations Chair Rosa DeLauro (D-CT) on May 6 said she plans to mark up fiscal 2022 spending bills in June, before expected floor votes in July.  Lawmakers would have to finish their spending bills by Sept. 30, when the government’s fiscal year ends, or pass a stopgap measure to avert a shutdown of government agencies. (BGov, May 6)

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Biden Administration Requests Voluntary “Commitments” from CRE Companies to Help Tackle the Climate Crisis

Posted on by Trey Jackson

The White House with Washington Monument

As part of the roll-out for its American Jobs Plan to invest in the nation’s “physical” infrastructure assets, the Biden Administration is asking real estate companies to make voluntary “commitments” to help reduce the built environment’s carbon footprint.  (Climate Commitment Fact Sheet)

  • The White House seeks three categories of voluntary “commitments” from real estate companies. A fact sheet prepared by The Roundtable provides more details:

(1)   EV Charging Stations: Commitments to install a significant number of EV charging infrastructure in parking lots, garages, gas stations, and other areas.

(2)   Clean Power Purchases: Commitments to purchase clean power in amounts that “offset” or “credit” the electricity consumed by an entire or majority of a real estate portfolio.

(3)   Data Sharing: Commitments for a real estate company to share data on building energy consumption with federal agencies and US-DOE’s national laboratories.

  • Mark Chambers, Senior Director for Building Emissions with the White House Council on Environmental Quality (CEQ), outlined these commitments with The Real Estate Roundtable’s Board of Directors on April 20 timed with the Spring 2021 Roundtable meeting. (Roundtable Weekly, April 23).

White House Recognition

EV stations CRE

  • Participating companies stepping up to the challenge will be recognized by the Biden Administration.  A small number of commitments, deemed “significant” by the White House and reached within the next 7-10 days, may be showcased on May 17 with Cabinet-level participation at the virtual Better Buildings Summit sponsored by the U.S. Department of Energy.
  • The Administration’s outreach to CRE is part of a multi-industry push to also enlist the manufacturing, technology, transportation, power generation, and utility sectors as “partners” in tackling the climate crisis. (Forbes, April 29; Reuters, Feb. 3)
  • Over 400+ businesses and investors recently signed an open letter urging the Biden Administration to cut U.S. GHG emissions in half by 2030 (relative to a 2005 baseline).

Any real estate company interested in exploring a commitment and earning recognition from the White House should contact Mark Chambers directly at Mark.C.Chambers@ceq.eop.gov. The Roundtable can also facilitate connections to the Administration through Duane Desiderio, Senior VP for energy and infrastructure policy (ddesiderio@rer.org).

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Real Estate Roundtable Statement on President Biden’s American Jobs Plan and American Families Plan

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(WASHINGTON, D.C.) — “President Biden’s American Jobs Plan and American Families Plan offer very credible initiatives to address some of our nation’s most pressing needs — a modernized infrastructure, a more comprehensive approach to climate-related matters, as well as increased investments in housing, education and child care.    

The real estate industry strongly supports bold actions to finance infrastructure needs, expand the economy, and promote job growth, particularly solutions that help keep real estate — which employs over 13 million Americans and provides three-quarters of local tax revenue — in healthy balance.  

Responsibly financing these, and other, initiatives obviously will require additional tax revenue.   

Many businesses and communities are still straining to emerge from the COVID-19 pandemic. As policymakers consider the options to raise this needed revenue, we strongly urge that the focus be on broad-based tax increases that do minimal damage to job creation, risk taking and entrepreneurial activity.     

Unfortunately, particularly when considered in total, many of the tax proposals accompanying the American Jobs Plan or American Families Plan, would reduce economic activity, impede job growth, and diminish opportunities for startup businesses and those less advantaged.  

Eliminating the reward for investing capital, risking personal savings and borrowing, providing construction guarantees, or providing plain old sweat equity would have enormous economic impacts across the country . . . some of which are known, but many of which are unknown and could result in significant unintended consequences.   

Rewarding risk with a capital gains rate that is lower than the ordinary tax rate, allowing real property to be traded with some tax deferral, recognizing that risks that qualify for capital gains treatment are not just associated with cash investments — together these policies encourage the productive risk-taking that spurs investment in economically struggling communities and more challenging assets, like affordable housing.  

The current law in these areas may be in need of review and reform, but repealing these incentives is simply not wise.   

As this important process moves forward, The Real Estate Roundtable will share data, research, and recommendations with the Administration and lawmakers to advance sound tax policy that is fair, productive and provides equal opportunities for all Americans.”

The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.

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Only 17% of Global CEOs Plan to Reduce Office Footprint Post-COVID; Office Demand Activity Posts Significant Gains

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Chicago skyline with lake in background

A KPMG survey of global CEOs shows that only 17% are considering downsizing their office space in the post-pandemic period – a drop from 69% recorded last August. Approximately one-third of the 500 CEOs in 11 key markets interviewed also anticipate a return to normal business operations this year, while 45 percent expect normality to resume in 2022. (KPMG 2021 CEO Outlook Pulse Survey) 

Key Findings

  • “The COVID-19 vaccine rollout is providing leaders with a dose of optimism as they prepare for a new reality,” KPMG Global Chairman and CEO Bill Thomas said. The report shows that global CEOS are:

» Less likely to downsize their physical footprint compared to 6 months ago

» Encouraged to reopening workplaces by government action and vaccination rates

» Apprehensive about a fully remote workforce

» Concerned increasingly about cyber security as remote working has increased

» Overwhelmingly looking to increase focus on ESG issues

 Office Demand Improving:

  • Additionally, the survey shows only 21% of businesses are looking to hire employees who work predominantly remotely – a significant reduction from 73% in 2020. The KPMG interviews with CEOs were conducted in February and March of this year. (Workplace Insight, March 24 and GlobeSt, March 25)

  • The outlook for office demand is on the upswing, supported by recent data by the national VTS Office Demand Index (VODI) that shows both in-person and virtual tenant tours posted large gains in January and February.
  • The VTS report shows that recent office demand activity is 38% lower compared to pre-pandemic levels – after having plummeted over 85% from February to May 2020. Additionally, all seven core office markets covered by VODI saw an increase in demand for office space in February 2021 compared to October 2020.
  • “While we saw some growth in demand in the back half of 2020, the exponential increase in the first two months of 2021, (combined) with the announcement from the Biden Administration that all Americans will be eligible for the vaccine by May 1, 2021, is providing confidence that a meaningful recovery is on the horizon,” VTS CEO Nick Romito said. (GlobeSt, March 25)

Noteworthy:

  • Microsoft will allow 57,000 employees back to its headquarters in suburban Seattle on March 28, although workers can choose whether to continue working remotely or a hybrid approach combining home and office. (AP, March 22)

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Roundtable Analysis and Summary of The American Rescue Plan

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March 6, 2021 – Senate Democrats passed an amended, $1.9 trillion pandemic relief package, The American Rescue Plan – that has now been sent back to the House for final passage before current unemployment benefits expire March 14. 

See The Roundtable’s document — “Summary and Analysis of Key Economic Provisions in The American Rescue Plan.”

February 27, 2021 – The American Rescue Plan Act of 2021 (H.R. 1319) was passed by the House of Representatives is a $195 trillion COVID-19 relief package that provides $638 billion in tax cuts, offset by $45 billion in tax increases, and represents over 2% of GDP in 2021.

 

2021 National Policy Agenda

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2021 Policy Agenda (entire agenda)

Intro

Tax Policy 

Capital & Credit

Energy & Climate

Infrastructure & Housing

Homeland Security