Roundtable Issues Call-to-Action to Members Concerning the Debt Ceiling
Remote Work Continues to Exert Economic Pressure on CRE and Cities as Mayors Explore Options
Roundtable Comments to EPA on Building Performance Standards, Electrification
Fed’s Climate Risk Assessment Exercise Will Include Impact on Banks’ CRE Portfolios
Roundtable Weekly
January 20, 2023
Roundtable Issues Call-to-Action to Members Concerning the Debt Ceiling

U.S. Capitol from side with cloudsThe Real Estate Roundtable yesterday urged its membership—leaders of the nation’s top publicly held and privately owned real estate ownership, development, lending and management firms—to contact federal lawmakers to raise the nation’s debt ceiling. Treasury Secretary Janet Yellen said the U.S. reached the maximum amount it can legally borrow yesterday, and that “extraordinary measures” would allow the country to continue paying its bills, but only until early June. (NPR and Yellen letter to House Speaker Kevin McCarthy, Jan. 19)


  • In the all-member Call-to-Action, Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) and Roundtable President and CEO Jeffrey DeBoer wrote, “We now believe the risk of a default on the federal debt in 2023 is a real and meaningful concern that must not be taken lightly.” Congress has faced this statutory limit on debt 78 times in the past, yet has always acted to increase the debt limit. The note expressed their concern that Congress will face more difficulty in reaching an agreement on the debt ceiling now amid a substantial increase in political acrimony.

  • Today, DeBoer said, “Some threats to the US economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”

  • Federal Reserve economists believe a prolonged stand-off could cause private interest rates to rise sharply, create liquidity pressures, and severely impair financial markets. “As default risk rises, the impacts will be felt throughout the economy, but especially in borrowing-intensive industries such as real estate,” the Call-to-Action added.

  • The Roundtable note encourages its members to contact both policymakers in Congress and the White House to raise the debt ceiling soon.

Policymaking in the 118th Congress and significant challenges such as the debt ceiling will be discussed during The Roundtable’s State of the Industry Meeting next week in Washington, DC.

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Remote Work Continues to Exert Economic Pressure on CRE and Cities as Mayors Explore Options
downtown Harford CT

As the pandemic-induced rise of remote work has lowered office demand and occupancy rates, building repurposing projects are on the rise—and the nation’s mayors are exploring ways to revitalize their downtowns and damaged tax bases. (Commercial Property Executive, Jan. 16 | CBRE Research, Dec. 2 | New York magazine, Dec. 29)

Growing Threat to Municipal Tax Bases

Miami Mayor Francis Xavier Suarez
  • The president of the U.S. Conference of Mayors, Miami Mayor Francis Xavier Suarez, above, will discuss the issue of how cities are responding to the economic impact of hybrid work arrangements during The Real Estate Roundtable’s Jan. 24 business meeting in Washington.
  • Additionally, members of the Ohio Mayors Alliance, a bipartisan group of mayors representing the state’s 30 largest cities, recently issued a report that identified remote work’s economic threat to municipal revenue as among their top concerns for 2023. (Dayton Daily News, Dec. 19)

  • A Jan. 19 editorial in the Washington Post focuses on the national problem of hybrid work for downtown areas and suggests paths to recovery, including the need to speed up permitting, rezoning and easing of restrictions. “Cities must adapt to this new reality or risk a downward spiral of falling commercial property values, lower taxes on those buildings and ghost downtowns that could lead to increased crime and homelessness,” the editorial states.

  • Employees working full-paid days from home increased to about 30 percent from 5 percent before the pandemic, according to a July 21 panel on “Vulnerable Cities Facing Work from Home Realities” from the Volcker Alliance and the Penn Institute for Urban Research.

Federal Agencies & Remote Work

image from Gentex
  • Federal government employees were recently urged to return to their agency offices by Washington, D.C. Mayor Muriel Bowser, who called on President Biden to urge more federal workers back to the workplace and convert underutilized commercial real estate spaces into affordable housing. (Roundtable Weekly, Jan. 6)

  • Mayor Bowser’s views reiterated a letter sent on Dec. 12 by The Roundtable to President Joe Biden about the ongoing, harmful economic impacts of widespread remote work on cities, local tax bases, and small businesses—and how work-from-home policies by federal agencies threaten to magnify these negative economic and social consequences. (Roundtable letter | GlobeSt and CoStar, Dec. 15) 

    • Legislation introduced in the House of Representatives last week would require all federal agencies to revert to pre-pandemic office arrangements that were in effect on December 31, 2019 and give employees 30 days to return to their offices. [Roundtable Weekly, Jan. 13 and Bill text of the SHOW UP Act (H.R. 139)]

      • Any federal order to mandate government workers back to their offices could be complicated by federal worker labor unions, which support flexible hybrid arrangements. (GlobeSt, Jan. 17 and (TechTarget,  Jan. 12)

      Meanwhile, the Federal Reserve released its “Beige Book” this week, which reports on national economic conditions. The report stated, “Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market.” Additionally, some bankers reported to the Fed that higher borrowing costs had begun to dampen commercial lending. (Beige Book national summary, Jan. 18 and GlobeSt, Jan. 20)

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      Roundtable Comments to EPA on Building Performance Standards, Electrification

      The Real Estate Roundtable submitted comments this week encouraging the Environmental Protection Agency (EPA) to use its grant authority to foster consistent, practicable, and cost-efficient local building mandates and electrification programs. (Roundtable letter, Jan. 18)

      Consistency Urged in Building Performance Standards

      • In addition to clean energy tax incentives for the private sector, the Inflation Reduction Act (IRA) devotes billions in grant money for EPA to dole-out to states and cities for greenhouse gas (GHG) reduction programs. [White House Guidebook, Dec. 15]

      • IRA grants could support localities as they develop and enforce building performance standards (BPS) that mandate owners to reduce energy use and emissions. Dozens of BPS laws have emerged in jurisdictions across the United States. (EPA Policy Brief, Jan. 19) (Roundtable Weekly, July 1, 2022)

      • The Roundtable’s Jan. 18 letter urges EPA to use its grant authority to encourage consistency in BPS mandates. A “hodge-podge” of state and local laws complicates compliance by building owners with nationwide real estate portfolios and hinders responsible investment strategies, according to The Roundtable’s letter.

      • The Roundtable’s position is that EPA should not award IRA grants unless state or local recipients ensure their BPS laws offer uniform federal tools, data, and protocols for enforcement and compliance.

      • These federal standards include EPA’s ENERGY STAR Portfolio Manager, its GHG Emissions Calculator, eGRID factors that convert electricity use to GHGs, and metrics already recommended by EPA to support BPS efforts.

      Tenant Energy Data and “Practicable Electrification”

      • The Roundtable letter also advocates that utilities should be eligible for EPA grants to develop technologies that provide owners of multi-tenant buildings with “whole building” energy data. Owners need data on tenants’ energy use to meet BPS mandates and to attain the IRA’s new tax deduction for building retrofits. (Fact Sheet, updated Jan. 5.)

      • EPA can also devote grant dollars for building electrification “partnerships.” The Roundtable directed EPA to the federal government’s own BPS and NYSERDA’s Empire Building Challenge as paradigms that may accelerate voluntary and cost-effective building electrification scenarios in the private sector. (Roundtable Weekly, Dec. 9, 2022)

      • In addition, The Roundtable letter advocates that grants to help standardize corporate climate reporting should prioritize consistency in accounting for emission benefits from the purchase of Renewable Energy Certificates (RECs), and for embedded carbon in construction materials and building products purchased by real estate owners and developers.

      IRA tax incentives and grant programs affecting CRE will be among the topics discussed during The Roundtable’s Sustainability Policy Advisory Committee (SPAC) Meeting on Jan. 25 in Washington, D.C., held in conjunction with Jan. 24 State of the Industry meeting.

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      Fed’s Climate Risk Assessment Exercise Will Include Impact on Banks’ CRE Portfolios

      Federal ReserveThe Fed released new details this week about its “pilot climate scenario analysis”—an exploratory exercise that will require six major banks to report by July 31 on how extreme weather event scenarios would impact their operations, investments and real estate portfolios. (Reuters, Jan. 17 and Politico PowerSwitch, Jan. 19)

      Risk Scenarios & CRE

      • The pilot exercise aims to learn about climate risk-management practices and challenges of the six largest U.S. banks—and enhance their ability to identify, measure, monitor, and manage climate-related financial risks.

      • The banks will analyze the impact of two risk scenarios on corporate and CRE lending exposures in their portfolios, according to the Fed’s 52-page set of instructions for Bank of America, Citigroup, Goldman Sachs Group, JPMorgan Chase, Morgan Stanley and Wells Fargo. (Fed news release, Jan. 17)

      • One scenario will include how storms, floods and other “physical risks” could affect residential and commercial real estate portfolios in northeast over a one-year horizon.

      • The second scenario will focus on “transition risks,” which refers to financial stresses caused by regulations and market forces that compel shifts to a lower carbon economy. The banks will analyze impacts over a 10-year horizon, using a scenario based on current policies—and one based on reaching net zero greenhouse gas emissions by 2050. (Yahoo News and Fed Participant Instructions, Jan. 17)

      What’s Next

      Federal Reserve's 2023 pilot climate scenario analysis

      • The Fed plans to publish a summary of its climate scenario analyses by the end of 2023.

      • Banks will calculate and report to the Fed on credit risk parameters such as probability of default, internal risk rating grade, and loss given default.

      • The Fed’s climate exercises are different from bank stress tests, since these climate risk scenarios are exploratory in nature and have no capital consequences. (Fed Participant Instructions, Jan. 17)

      • The central bank’s exercises come as various federal agencies are taking action on risks that climate change may pose to the economy.

      • The Securities and Exchange Commission (SEC) is expected to issue climate disclosure regulations from by April. The proposed rules would require all registered companies to disclose material financial risks related to climate change, and may include new disclosure requirements for “Scope 3” GHG emissions. The Roundtable submitted extensive comments last year on the SEC’s about the proposal. (Roundtable Weekly, June 10)

      • The Federal Insurance Office within the Treasury Department has also requested information on climate-related financial risks from the insurance sector to identify geographic areas that might lack coverage. (ClimateWire, Jan. 18 and Federal Register, August 31, 2021)

      Climate-related regulatory proposals affecting CRE will be among the topics discussed during The Roundtable’s Jan. 24-25 State of the Industry Meeting in Washington, DC.

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