How Biden’s Climate Initiatives Will Affect Real Estate
It’s best to assume regulations will be harmful to the industry but that incentives for both companies and landlords greening their buildings could be helpful.
Soon after becoming President, Joe Biden issued an Executive Order to rejoin the Paris Agreement. He also revoked the Keystone XL oil pipeline permit and directed federal agencies to reevaluate environmental policies during Donald Trump’s presidency.
In addition, Treasury Secretary Janet Yellen is looking to add Obama administration alum, Sarah Bloom Raskin, for a new senior position that would head a new Treasury climate “hub,” according to The Wall Street Journal.
While these actions don’t directly address commercial real estate, buildings account for 40% of the world’s energy consumption. In a new post, JLL suggests that it’s not a stretch to expect more stringent regulations to cover the companies that occupy office space and building owners.
“Biden is sending a signal to the global community and to fellow Americans that the US is once again going to get serious about climate action,” says Jennifer Hill, Global Product Owner, Sustainability Integration, JLL in the post.
Hill says it’s best to assume regulations will be harmful to the industry but that incentives for both companies and landlords greening their buildings could be helpful.
But there are some unanswered questions around how climate-related regulations fit in with the Biden administration’s budgetary guidelines, especially around infrastructure. Hill says investors should also consider the shift that comes with focusing on their real estate and infrastructure investments collectively.
“If there is even a moderate government growth plan around infrastructure, that sector will present a sound investment that investors may choose over assets that need to be retrofitted to meet climate-related regulations, especially if those are not incentivized as well,” Hill says.
Hill says there is also a possible scenario where regulations boost infrastructure and real estate investments.
Even though the environment wasn’t a focus for the Trump administration, many organizations were making the environment a priority. If nothing else, it helped them attract and retain talent.
Robbie Hobbs, Global Product Group Lead for Workplace Management at JLL, notes that the thousandth company has pledged to meet science-based targets that would mitigate climate change. Also, the number of companies making net-zero carbon pledges more than doubled over 2019 levels.
While the environment is important, the Biden administration is also very focused on COVID relief in the near term, which could give the CRE industry some breathing room with new regulations—as well as some much needed financial relief.
“There is no question what the number one priority is for the Biden administration, and that’s COVID,” Jake Fingert, general partner, Camber Creek and a former member of the National Economic Council during the Obama administration, said in a recent interview with GlobeSt.com. “That is abundantly clear.”
Fingert thinks COVID legislation could offer a lot of relief to the hard-hit retail sector. “There are a few things that we’re expecting to see either in this initial package or a follow-up package that will have an impact on retail,” he says.