Obama Issues Call to Economic Arms in Speech

WASHINGTON, DC—The US economy has dramatically improved over the space of the last six years. Now it's time to make it even better. That, in a nutshell, was President Obama's underlying theme in his State of the Union address, along with the obligatory policy prescriptions.

"Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999," he said. "Our unemployment rate is now lower than it was before the financial crisis. More of our kids are graduating than ever before; more of our people are insured than ever before; we are as free from the grip of foreign oil as we've been in almost 30 years."

In his annual address to Congress, Obama called for a number of initiatives, most of which would touch upon the commercial real estate industry either directly or obliquely. He called for increased investment in basic infrastructure, tax reform, better training for higher-paying jobs, community college education for all students and paid sick leave. He referenced repeatedly the 'American Dream' and how to make it more accessible to all Americans, especially the shrinking middle class and working class.

The president also noted steps the Administration has already taken in recent weeks and months. Recently, for instance, the Federal Housing Administration cut annual mortgage insurance premiums by half a percentage point.

It was a smart move, US Department of Housing and Urban Development Secretary Julián Castro said in his analysis of the speech.

"Right now, FHA premiums are at a historically high level…" he said.

"We expect our premium reduction to help more than 2 million borrowers save an average of $900 annually over the next three years. It will also encourage nearly a quarter million new borrowers to purchase their first home."

All other FHA requirements will remain the same, Castro said including verification of a person's ability to pay.

The president also urged Congress to overhaul the nation's cybersecurity laws. This too has an impact on the commercial real estate industry. A recent GAO report highlighted the Department of Homeland Security's nascent steps steps to begin to understand the cyber risk to building and access controls systems in federal facilities. It is a good start, the GAO concluded, but significant work remains.

The DHS has not developed a strategy, in part, because cyber threats involving these systems are an emerging issue, it said.

The question, of course, as critics, fans and industry observers alike have pointed out, is how to pay for these measures.

"While our economy has turned a corner, it is still vulnerable to shocks that could bring back the instability of the past several years, and that should be avoided," Thomas J. Bisacquino, president and CEO of NAIOP, cautioned in his response to the State of the Union.

"Absent a comprehensive tax overhaul, which we support, it's critical that current tax policy be renewed so that investors and developers continue to take financial risk," he said.

Bisacquino makes clear the importance of supporting CRE in policy-making. The commercial real estate industry contributed $376 billion to GDP last year, he said. It supported 2.8 million jobs, and produced $120 billion in personal earnings.

"Despite better growth in 2014, our industry could create significantly more jobs and economic punch with smart infrastructure investment and consistent tax policy from the federal government."