President Biden will unveil an ambitious economic growth plan on March 31 that may cost up to $4 trillion to fund his administration’s wide-ranging goals on infrastructure, climate and domestic policies. (Reuters, March 24 and Bloomberg News, March 25) 

• The administration’s legislative effort may be split into two parts – an initial package that funds transportation projects with a focus on climate change, and a second that addresses domestic priorities such as universal prekindergarten, national childcare and free community college tuition.  (Wall Street Journal and Washington Post, March 22, New York Times March 25)
  
  
• Congressional Democrats are working on a filibuster-proof fiscal 2022 reconciliation bill to advance President Biden's economic recovery plan, along with a five-year surface transportation reauthorization. Funding for the current surface transportation bill expires Sept. 30. (Law360, March 22)
  
  
• Axios reported on March 23, the White House is considering using the budget reconciliation process two more times this year, after using it to pass the recent $1.9 trillion pandemic relief package without any Republican support. Enacting three separate reconciliation packages would be unprecedented, and require a ruling from the Senate parliamentarian that proposed legislation is eligible for reconciliation under the Congressional Budget Act of 1974. 

Focus on Gateway Project: 

• The “Gateway” rail tunnel project between New York City and New Jersey is a high priority for the Biden administration that is being treated with a “sense of urgency,” according to Transportation Secretary Pete Buttigieg, who testified March 25 before the House Transportation and Infrastructure Committee. (BGov, March 25)
  
  
• “This is a regional issue, but one of national significance because if there were a failure in one of those tunnels, the entire U.S. economy would feel it,” Buttigieg said. He added that federal and state officials are working “to develop the next administrative draft of the environmental impact statement, which is a big part of what needs to be completed in order to get there.”
  
  
• Buttigieg also acknowledged that funding the administration’s infrastructure transportation goals must look to other revenue sources than borrowing. “There is a simple set of places we can look: user fees, general fund or other tax sources as Congress has done to fill gaps in Highway Trust Fund in recent years or borrowing,” Buttigieg testified.

 How to Pay: 

• Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell testified jointly this week before House and Senate committees on economic conditions and pandemic relief. (Wall Street Journal, March 23)
  
  
• Yellen testified before the House Financial Services Committee on March 23 that future taxes are needed to fund infrastructure programs. “A package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy, and changes to the tax structure will help to pay for those programs.” She added, “We do need to raise revenues in a fair way to support the spending that this economy needs to be competitive and productive.” (Financial Times, March 23)
  
  
• Chairman Powell responded to a concern from House Committee Member Blaine Luetkemeyer (R-MO) that Fed data indicates 51 percent of current commercial real estate debt is held by banks and that community banks have a higher concentration of these loans. Powell stated, “We're monitoring CRE very carefully. Its concentrations arise principally in smaller banks, and we'll have to monitor it carefully as we allow moratoriums to elapse. We're well aware of the issue and we'll be sure to move very, very carefully when we do address that.”
  
  
• The two regulators also testified before the Senate Banking Committee on March 24. Treasury Secretary Yellen stated that the federal government can afford to invest trillions, despite the national debt. “My views on the amount of fiscal space that the United States, I would say, have changed somewhat since 2017. Interest payments on that debt relative to GDP have not gone up at all, and so I think that's a more meaningful metric of the burden of the debt on society and on the federal finances,” Yellen said. (The Hill, March 24)

 Taxes & CRE: 

• A March 25 BisNow webinar on Tax Policy and the Impact on CRE featured Roundtable Senior Vice President and Tax Counsel Ryan McCormick, bottom left in photo. The webinar focused on the outlook for real estate tax policy in 2021, with an emphasis on like-kind exchanges and opportunity zones.
  
  
• Other participants included Ja’Ron Smith, former Deputy Assistant to President Trump; Capital Square Founder and CEO Louis Rogers; and David Franasiak, Principal at Williams & Jensen. (Watch Video)

Congress leaves Washington today for a two-week recess. “When the Senate returns to session, our agenda will be no less ambitious than it was over the past few months,” Senate Majority Leader Chuck Schumer (D-NY) said yesterday. (The Hill, March 25 and New York Times, March 26) 

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The Biden Administration continued to work this week on an aggressive goal to slash U.S. carbon emissions in half by 2030, as the Fed announced plans to monitor climate change threats to the financial system. (Bloomberg, March 23 and E&E News, March 24)

A National Effort

• White House Climate Advisor Gina McCarthy is leading a National Climate Task Force that will finalize U.S. goals and commitments before participating in an April 22 virtual global climate summit on Earth Day. (White House Readout of the Second National Climate Task Force Meeting, March 18)
   
• The government-wide effort includes input from 21 federal agencies and industrial sectors, ranging from car manufacturers to aviation to the oil industry. (The Hill, March 22 and E&E News, March 23)
  
  
• The prospects for both chambers of Congress to pass legislation that puts a price on carbon are still remote, even though key business groups such as the U.S. Chamber of Commerce and the American Petroleum Institute have now come out in favor of “market-based” climate policy. (Axios Generate, March 26)

Climate Change and Real Estate 

• Federal Reserve Governor Lael Brainard this week emphasized the impact climate change could have on real estate markets. She stated during a March 23 speech, “… the usability of real estate in many areas will be directly affected by the increased risks of floods, wildfires, severe storms, and sea-level rise associated with climate change.”
  
  
• She added, “Sudden realizations of climate-related risks could cause rapid shifts in investor sentiment and shocks to asset prices.” (Financial Stability Implications of Climate Change speech by Gov. Brainard, March 23)
  
  
• Brainard announced the Fed has established new oversight committees “to identify, assess, and address climate-related risks to financial stability.”
  
  
• Fed Chairman Jerome Powell and Treasury Secretary Yellen also commented on their increased attention to the risks posed by climate change during a March 23 hearing before the House Financial Services Committee and a March 24 Senate Banking, Housing and Urban Affairs Committee hearing.
   
• Secretary Yellen will lead the first meeting of the Financial Stability Oversight Council under the Biden administration on March 30 to discuss climate-related financial risks. (The Hill, March 24) 

The administration’s climate policy plans and their impact on CRE will be a focus of discussion during The Roundtable’s Spring Meeting on April 20 (held remotely). 

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A KPMG survey of global CEOs shows that only 17% are considering downsizing their office space in the post-pandemic period – a drop from 69% recorded last August. Approximately one-third of the 500 CEOs in 11 key markets interviewed also anticipate a return to normal business operations this year, while 45 percent expect normality to resume in 2022. (KPMG 2021 CEO Outlook Pulse Survey) 

Key Findings

• “The COVID-19 vaccine rollout is providing leaders with a dose of optimism as they prepare for a new reality,” KPMG Global Chairman and CEO Bill Thomas said. The report shows that global CEOS are:

» Less likely to downsize their physical footprint compared to 6 months ago

» Encouraged to reopening workplaces by government action and vaccination rates

» Apprehensive about a fully remote workforce

» Concerned increasingly about cyber security as remote working has increased

» Overwhelmingly looking to increase focus on ESG issues

 Office Demand Improving:

• Additionally, the survey shows only 21% of businesses are looking to hire employees who work predominantly remotely – a significant reduction from 73% in 2020. The KPMG interviews with CEOs were conducted in February and March of this year. (Workplace Insight, March 24 and GlobeSt, March 25)
  
  
• The outlook for office demand is on the upswing, supported by recent data by the national VTS Office Demand Index (VODI) that shows both in-person and virtual tenant tours posted large gains in January and February.
  
  
• The VTS report shows that recent office demand activity is 38% lower compared to pre-pandemic levels – after having plummeted over 85% from February to May 2020. Additionally, all seven core office markets covered by VODI saw an increase in demand for office space in February 2021 compared to October 2020.
  
  
• “While we saw some growth in demand in the back half of 2020, the exponential increase in the first two months of 2021, (combined) with the announcement from the Biden Administration that all Americans will be eligible for the vaccine by May 1, 2021, is providing confidence that a meaningful recovery is on the horizon,” VTS CEO Nick Romito said. (GlobeSt, March 25)

Noteworthy:

• Microsoft will allow 57,000 employees back to its headquarters in suburban Seattle on March 28, although workers can choose whether to continue working remotely or a hybrid approach combining home and office. (AP, March 22)

• Amazon Global Real Estate Chief: Company To Return To Office ‘Pretty Much As We Were Pre-Covid’ (Bisnow, March 23)

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