White House Releases Plans to Battle Inflation and Streamline Infrastructure Permitting; Congressional Leaders Urge Swift Implementation of New EB-5 Law
Economic Headwinds and Geopolitical Uncertainty Top CRE Executivesโ€™ Views About Q2 Market Conditions
Roundtable and Nareit Raise Concerns to SEC About Proposed Cybersecurity Rules; SEC Climate Proposal Stokes GOP Criticism
Roundtable Weekly
May 13, 2022
White House Releases Plans to Battle Inflation and Streamline Infrastructure Permitting; Congressional Leaders Urge Swift Implementation of New EB-5 Law
President Biden on inflation

President Joe Biden this week committed that his administration’s top economic priority is battling inflation. Biden’s efforts to combat rising prices include proposals that would increase taxes on large corporations and the wealthiest Americans – and possibly eliminate Trump-era tariffs on foreign imports. (White House Inflation Plan | News conference video | The Hill, May 10)

  • The Labor Department reported that consumer prices increased 8.3% in April compared to one year ago, as inflation remains near a four-decade high. (Labor Department news release and AP, May 11)
  • Federal Reserve Chair Jerome Powell discussed the Fed’s inflationary goals during an interview this week with Marketwatch, stating, “Whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.” The Fed recently approved the biggest interest hike in 22 years and announced plans for reducing its nearly $9 trillion balance sheet. (CNBC, May 12)
  • Powell also recently stated, "There is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings." He added, "the American economy is very strong, and well-positioned to handle tighter monetary policy.” (Wall Street Journal, May 4)
  • A semi-annual report released this week by the Fed detailed risks to financial stability, pointing to the potential impact of inflation, sharply rising interest rates and the war in Ukraine. The report also flagged a decline in liquidity. "While the recent deterioration in liquidity has not been as extreme as in some past episodes, the risk of a sudden significant deterioration appears higher than normal," according to the report. (Wall Street Journal, May 9)
  • Powell was approved this week to serve a second term as Fed Chair by a bipartisan Senate vote of 80-19. (Politico, May 12)

Infrastructure Permitting

Infrastructure photo Cleveland
  • The White House this week also unveiled a plan to strengthen and accelerate federal permitting and environmental reviews funded by the Infrastructure Investment and Jobs Act (IIJA) passed last November. (White House Fact Sheet, May 11 and Roundtable Weekly, Nov. 12, 2021)
  • The Biden administration said its Permitting Action Plan will improve environmental reviews to avoid duplicity and will create sector-specific teams aimed at speeding permitting and resolve supply chain issues that hinder construction.

EB-5 Regional Centers

EB-5 and passport

  • Four congressional leaders wrote a bipartisan letter to Homeland Security Secretary Alejandro Mayorkas this week to counter a statement by the U.S. Citizenship and Immigration Services that existing EB-5 regional centers must apply for recertification. The USCIS  statement, if put into effect, would delay regional center enterprises from seeking new foreign investment pending reapproval. (Congressional letter, May 9)
  • The letter was signed by Senate Majority Leader Chuck Schumer (D-NY), House Judiciary Committee Chair Jerrold Nadler (D-NY), and Senate Judiciary Committee members John Cornyn (R-TX) and Lindsey Graham (R-SC). 
  • Their letter clarified that previously existing regional centers are not required to be recertified under the EB-5 Reform and Integrity Act of 2022 passed last March – but the centers must swiftly meet all of the new law’s anti-fraud and homeland security protections. (EB-5 investors blog, May 10)

The Roundtable-supported  EB-5 Reform and Integrity Act was the first significant update to the regional center program since its creation by Congress in the early 1990s. (Roundtable Weekly, March 11, Roundtable news release and EB-5 Fact Sheet)

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Economic Headwinds and Geopolitical Uncertainty Top CRE Executivesโ€™ Views About Q2 Market Conditions

image - Roundtable President and CEO Jeffrey DeBoer

Commercial real estate executives remain optimistic about overall Q2 market conditions despite growing economic headwinds and geopolitical uncertainty, according to The Real Estate Roundtable’s Q2 2022 Economic Sentiment Index released on May 13, 2022.

  • Roundtable President and CEO Jeffrey DeBoer, above, said, “The decline in this quarter’s Real Estate Roundtable Sentiment Index reflects concerns regarding inflationary pressures, interest rate increases, labor shortages and supply chain disruptions. Even so, the overall sentiment of commercial real estate industry senior executives remains positive. Businesses and individuals continue to rethink how real estate meets their evolving working, living, and traveling preferences. Building owners, managers and financiers across the nation are partnering with their business and residential tenants to respond, while also pressing forward in developing and redeveloping buildings to be greener, smarter, and more efficient.”
  • He added, “Our Q2 Sentiment Index reveals especially bright spots for lease demand in a wide swath of the economy, particularly regarding life sciences, industrial, multifamily, and data center assets. At the same time however, high inflation, rising interest rates, labor and supply chain shortages are increasing costs associated with all real estate development and operations. The impact of ongoing war in eastern Europe is another cloud tempering optimism. We urge national policymakers to focus on creating jobs and supporting strong real estate asset values. Both actions would buttress the overall economy and help local community budgets provide needed safety, education and transportation services.”
  • The Roundtable’s Overall Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environments—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. ­­­­ 

Topline findings include:

Q2 Real Estate Roundtable Economic Sentiment Index chart

  • The Roundtable’s Q2 2022 Economic Sentiment Index registered an overall score of 51, a decrease of 15 points from the previous quarter’s overall score and 26 points lower than a year earlier. Survey respondents remain optimistic but have tempered their expectations due to geopolitical and economic uncertainties, which include rising interest rates, increased inflation, and labor and supply chain shortfalls.
  • Perceptions vary by property type and geography, with industrial, multifamily, life sciences, and data centers continuing to be most favored. As employers continue to roll out return-to-office policies, the demand for office space remains uncertain.
  • Asset values have trended upward across asset classes compared to last year, while forward-looking expectations are starting to taper off.
  • Participants cited a continued availability of debt and equity capital despite heightened concerns over rising interest rates, geopolitical concerns, and inflationary risk.

Data for the Q2 survey was gathered in April by Chicago-based Ferguson Partners on The Roundtable’s behalf.  See the full Q2 report.

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Roundtable and Nareit Raise Concerns to SEC About Proposed Cybersecurity Rules; SEC Climate Proposal Stokes GOP Criticism

Cybersecurity computer operator at console with world map

The Real Estate Roundtable and Nareit raised concerns to the Securities and Exchange Commission (SEC) about their proposed rules related to cybersecurity risk management, strategy, governance, and incident disclosure. (Comment Letter, May 9) Industry Concerns
  • The letter states that The Roundtable and Nareit generally support the SEC’s efforts to ensure that investors receive accurate and comparable material information regarding company cyber risk management and incidents. (SEC  News Release |  Proposed Rule |  Fact Sheet)
  • However, the two industry groups expressed a number of concerns arising from the detailed, granular reporting that would be required by the SEC proposal and its rigid incident reporting deadlines, which may unintentionally exacerbate cybersecurity risks for issuers and impose unjustified burdens. Those concerns include:
  • It is vital to harmonize SEC reporting requirements with other federal and state cyber incident reporting requirements.
  • The Commission’s proposed 72-hour reporting window should incorporate flexibility for a reporting delay to accommodate other law enforcement and other contingencies.
  • Registrants should not be required to report detailed descriptions of their internal cybersecurity gameplans, which could compromise them in any number of ways.
  • The prescriptive requirements for disclosing risk management, strategy, and governance regarding cybersecurity risk are burdensome and unjustified.
  • The letter also raises concerns about the highly prescriptive nature of the requirements set forth in the Proposal and the “one size fits all” presumption that the prescriptive requirements will be appropriate for all industry sectors.
SEC Climate Disclosure Proposal logo - U.S. Securities and Exchange Commission
  • A separate SEC proposal on climate disclosure rules has drawn the ire of House Republicans, who have criticized the proposal and called for a hearing with the full commission. (E&E News, May 10)
  • In a May 4 letter to SEC Chair Gary Gensler, a group of House Republicans led by Oversight and Reform ranking member James Comer (R-KY) stated, “The Climate Disclosure Rule would represent the largest expansion of SEC authority without a clear legislative mandate from Congress.”
  • A regulatory push on multiple fronts by the Securities and Exchange Commission (SEC) prompted The Real Estate Roundtable and 24 other national business organizations to submit comments to Gensler about the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5 and Roundtable Weekly, April 8)
The proposed SEC climate disclosure rule has no immediate effect. If it is finalized, the action could have a significant impact on the real estate industry, requiring all SEC registered companies to report on climate-related risks through annual 10-Ks and additional filings. (SEC  News Release |  Proposed Rule |  Fact Sheet, March 22) #  #  #