CRE May Not Be in the Infrastructure Bill by Name, But It Is in Spirit

BlackRock recently looked at the potential impact of the Infrastructure Investment & Jobs Act on real assets. Besides noting “much needed funding for critical projects that encourage growth” and some sectors that would directly benefit, the company also briefly looked at real estate.

“While real estate is not included in the plan, real estate inherently needs strong infrastructure to be useful for tenants,” the report said. Improvements in roads and bridges are generally good for all real estate. Capital for intermodal facilities help many tenants, whether retail or third-party logistics, meaning greater value landlords can offer. Better broadband will open previously underserved areas for more development.

“Further, programs around drought response included in the bill will likely be necessary and especially supportive of real estate in the western region Programs related to flood mitigation and FEMA response should support eastern and southern parts of the United States,” the report continued.

Many in commercial real estate agree there is strong potential for benefits.

“Public investment will directly lead to new private investment and construction resulting in an increase in overall tax revenues to state and local municipalities,” Ross Moskowitz, a real estate partner at Stroock who specializes in public private partnerships and is a former NYC economic development official, tells GlobeSt.com.

There is also the potential to address increasing demand from investors to address climate risk. 

“We are seeing that ‘green’ incentives … will have the most direct effect on commercial real estate,” John Robbins, managing director for the USA at Turner & Townsend, tells GlobeSt.com.

“States that receive a capitalization grant under this program may provide loans to eligible recipients, which would include commercial energy audits and allow the recipients to identify and recommend lifecycle cost-effective opportunities to reduce the energy consumption of the facility of the eligible recipient, including HVAC,” adds Kirill Kniazev, marketing director at national HVAC firm Motili.

“We also expect to see a move to new building materials, specifically mass-timber as national building codes are updated to allow for taller buildings to be constructed,” Robbins says. “This will allow the material’s use in structures up to 18 stories high and nearly one million square feet in area. This is a clear signal that alternative building materials are going mainstream and will see significant growth soon.

One potential concern has been competition for materials and, especially, labor. But Moskowitz thinks that a natural difference in timing will mitigate any problems. “Though both public and private construction can occur in tandem, typically we will see government work starting first, reducing the likelihood for competition for labor, materials, etcetera,” he says. “Given that these types of projects have a long timeline, private investment can occur as certain milestones of the public investment are achieved.”