Cities Rush to Use Infrastructure Bill to Fund State and Local Projects

An influx of cities are already reaching out for guidance to implement changes across their real estate portfolios as a result of the $1.2 trillion infrastructure bill signed by President Biden this week, JLL reported.

“The bill includes provisions for local governments to hire experts in areas like charging stations, solar energy and renewable energy,” Brian Oakley, Executive Vice President, Public Infrastructure, JLL, said in a post. “Oakley said in a release, “Recognizing the need for charging stations is a great first step. That kind of deployment is a major infrastructure challenge.”

He suggested watching for clean energy and grid-related investments and incentives for public-private partnerships.

Breakdown of the Bill

What remains in this bill’s iteration will have some direct benefits for state and local entities, according to Oakley. The Infrastructure Investment and Jobs Act includes $7.5 billion in grants for governments to consider public-private partnerships for electric vehicle charging stations, among many other investments.

There are significant dollars to be invested in hard infrastructure like roads, bridges, and tunnels.

The $1.2 trillion bipartisan measure also includes:

• $47 billion in climate resilience measures to protect buildings from the storms and fires that result from climate change
• $65 billion to repair and protect the electric grid, build new transmission lines for renewable power and develop nuclear energy and “green hydrogen” and carbon capture technologies
• $39 billion to continue and expand current public transit programs, including help that allows cities and states to buy zero- or low-emission buses
• $66 billion to fix Amtrak and build out its service along the Northwest Corridor, in addition to building tens of millions for high-speed rail and other commuter rail
• $7.5 billion to build electric vehicle charging stations; $25 billion to repair airports to reduce congestion and emissions, encouraging the use of low-carbon flight technology

Said Oakley, “Where once they may have lagged in their efforts to deploy capital into the infrastructure that levels the playing field with other cities and states and even private businesses, state and local governments can realize immediate benefit from many portions of this legislation.

CRE Benefits Too 

As cities rush to take advantage of these funds, commercial real estate will be a natural beneficiary, says Scott Helberg, senior manager and real estate senior analyst with RSM US LLP. 

“Improvements in transportation, telecommunications, power and water will all drive increases in value across asset types and make communities more desirable,” he tells GlobeSt.com.

“Industrials is one sector in particular that will benefit because hundreds of billions of dollars are being allocated to the improvement of roads, bridges, and ports. This will make the supply chain quicker and more effective, thus driving up e-commerce traffic and the need for industrial real estate.”

Helberg said that another niche asset type that will get a boost are data centers, given that $65 billion is dedicated to improving and expanding broadband internet access.

“This will substantially increase the amount of internet users and provide even greater demand for data centers,” Helberg said. “Once the rollout is in place along with further investment in the power grid, data center developers will have more flexibility on where new centers can be located.”

In regard to current action, many real estate companies still need to wait and see specifically how the funds are allocated, Helberg said. “Now that the bill has been signed, state and local officials are now starting to build their case for their share of these funds,” he said.

Adding to Existing Infrastructure Projects

Still, it is clear for many current projects that the funding will help. Andrew Fogg, Partner and Co-Team Leader of Cox, Castle & Nicholson’s Land Use and Natural Resources Team, tells GlobeSt.com that many projects have various levels of public infrastructure that will try to tap into this infrastructure bill funding.

“For example, one of our clients is developing a new community adjacent to a freeway, and the city and county agencies are going to be building a new freeway overpass adjacent to that project,” Fogg said. “Our client is funding its fair share of the overpass improvements, which is approximately 25% of the cost of those public improvements, and the local agencies are going to have to fund the balance.

“These agencies are looking for funding sources, and we anticipate they will try to compete for some of these infrastructure bill dollars to get those improvements done more quickly than they otherwise could.”

Fogg said that there has also been a lot of talk in the Los Angeles region that government agencies are looking at those funds for various mass transit projects that are well along in the planning stage that could use these funds to build out those public infrastructure and transportation projects.

Will Funds be Sufficient?

But even firms that don’t have specific infrastructure projects in mind for funding are highly aware of how impactful the bill will be to their operations. Chris Loeffler, CEO and co-Founder of Caliber, tells GlobeSt.com that his company operates in several high-growth markets in the West and that “people’s ability to access our projects, whether housing, medical facilities, schools and other amenities is critical to the success of what we build and develop. 

“The infrastructure bill will help make sure that more roads, bridges, and other methods of transportation will be improved to ease entry to areas vital to Caliber’s growth and development.”

It may be that at least some of these companies will be disappointed by the end result after it becomes clear which infrastructure projects will be funded. 

The Wall Street Journal writes that based on the White House’s assessment of having 45,000 bridges deemed in need of repair, the $40 billion in funds from this bill would allot, on average, less than $1 million per bridge that made that list. 

“Does $1 million even cover the consulting, legal bills and environmental impact studies for a typical highway bridge renovation, let alone the work?” WSJ wrote.