• The Roundtable’s comments are in response to recent IRS notices on a host of issues affecting CRE. [Roundtable Weekly, Oct. 7 and Roundtable Fact Sheet, Sept. 20]. The letter requests further guidance and clarifications that would:
  • Allow businesses to “layer” multiple credits and deductions on the same buildings;
  • Support building retrofits that contemplate an asset’s “conversion,” such as from multifamily to office, within the revised building efficiency incentive under Section 179D;
  • Maximize installations of solar, wind, and other technologies to feed renewable power to buildings onsite—while also allowing property owners to “sell” excess generation back to the grid;
  • Optimize clean power deployment in low-income housing and economically distressed areas;
  • Offer a “safe harbor” for employers seeking the IRA’s credit boosts when they pay prevailing wages to laborers and mechanics involved in energy project construction and installation; and
  • Capitalize on changes to the tax code that would allow REITs, partnerships, and other businesses to “transfer” certain clean energy credits to third parties.

• Roundtable President and CEO Jeffrey DeBoer stated, “The Roundtable’s comments to policymakers will help ensure that the Inflation Reduction Act spurs new investments in clean energy and climate-saving measures that benefit our industry and our country.”
• The Roundtable letter was developed with input from its Sustainability and Tax Policy Advisory Committees. Treasury and the IRS are expected to start issuing implementing guidance before the end of the year.
• Roundtable Board Member and Sustainability Policy Advisory Committee Chair Tony Malkin, center in photo above, (Chairman, President, and CEO, Empire State Realty Trust, Inc.) led a panel discussion in September with Roundtable staff on how the IRA’s “clean energy” tax incentives impact CRE. [Watch the discussion].

The Roundtable's Real Estate Capital Policy Advisory Committee (RECPAC) met this week to discuss the current state of credit and capital markets. The Urban Land Institute (ULI) and PwC US also provided data points about market fundamentals in their recently issued publication, Emerging Trends in Real Estate 2023.

Shift to “New Normal”

• RECPAC’s meeting in New York City focused on interest rate trends, global capital flows, and the implications for financing and property development. (For more information on RECPAC, contact Roundtable Senior Vice President Chip Rodgers or call 202-639-8400.)
  
  
• ULI-PwC reports that industry participants are cautiously optimistic amid diminishing pandemic tailwinds and the potential for a “short yet shallow” recession. (ULI, Oct. 28 | download 125-page report)

• The annual report—a compilation of data and insights from 2,000 real estate experts—shows the industry is:
  • Reassessing the use of office space,
  • Addressing climate change impacts and ESG demands,
  • Experiencing a shift in investor sentiment and capital, and
  • Facing new opportunities from government infrastructure spending.
    
    
• The report’s survey revealed bifurcated market trends, with some aspects of the industry reverting to pre-pandemic patterns as others shift to a “new normal” that includes remote work arrangements. (PWC website | download full report)

Asset Classes in Flux

• ULI Senior Vice President Anita Kramer commented that as people continue to adapt to pandemic-influenced changes in their lives, property asset classes are in flux as owners and investors assess how to move forward. (Bisnow, Oct. 27 and  (ULI news release, Oct. 27)
  
  
• Byron Carlock, US real estate leader for PwC and a member of The Real Estate Roundtable, told REjournals this week that challenges facing CRE include rising interest rates, return-to-the-office issues, and the possibility of converting office space to alternative uses. (Interview with Midwest Real Estate News, Nov. 2)
  
  
• Carlock said, “The downtown buildings with large floor plates built from the ‘60s to the ‘80s might need a change. That’s significant because about 80% of our office stock was built in the ‘80s or before. We will see a great change in which office space is relevant and which is not.” (Roundtable Weekly, Oct 12—“Real Estate Industry Urges Lawmakers to Consider Tax Incentive for Property Conversions”)

Roundtable Reports

• Roundtable President and CEO Jeffrey DeBoer this week discussed the industry’s public policy agenda on the verge of the midterm elections during the American and Development Association’s Fall 2022 Conference in Washington. [Photo, left to right: ARDA President and CEO Jason Gamel, Former Congressman (R-PA) and Chair of the House Transportation Committee Bill Shuster, Jeffrey DeBoer, and U.S. Travel Association President and CEO Geoff Freeman.]

The Roundtable plans to release its Q4 Economic Sentiment Index report next week. The quarterly index provides a gauge of CRE leaders' views about the overall health of property markets, debt and capital availability, pricing, and asset values.

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