This week’s Fall Roundtable meeting came at a pivotal time for commercial real estate, as key policy issues take center stage in Washington. Discussions focused on national policies impacting the industry, including the implications of the recent elections, challenges in capital and credit markets, expiration of the 2017 tax bill, and the federal government’s role in supporting housing supply and regulating energy usage. (Bisnow, Nov. 11)

The meeting also covered topics such as return-to-office trends, office-to-residential conversions, and liquidity concerns. (The Roundtable’s  Fall 2024 Policy Priorities and Executive Summary)

Speakers & Policy Issues

Roundtable members engaged in policy issue discussions with the following guests:

• Reince Priebus, former White House Chief of Staff (President Trump) and the longest-serving chairman of the Republican National Committee in modern history, gave his perspective on the recent elections, dynamics on Capitol Hill, and potential focus of the new administration in 2025.

• Sen. Tim Scott (R-SC) is the current ranking member and presumed next chair of the influential Senate Banking, Housing, and Urban Affairs Committee and a senior member of the Senate Finance Committee. Sen. Scott advocated for expanding business and homeownership, enhancing financial literacy, and improving affordable housing by reducing regulations and advancing zoning reforms to foster economic growth and equity in communities.

• The Honorable Tom Barkin (President & Chief Executive Officer, Federal Reserve Bank of Richmond), provided a candid assessment of economic recovery and the challenges ahead. He also questioned the fundamental demand for office space as companies reassess their needs in a post-pandemic environment. (Reuters, Nov. 14)

• Rep. Richard Neal (D-MA) (Ranking Member, House Committee on Ways and Means), addressed the significance and major takeaways of the recent election and the outlook for tax and trade policy going forward. He discussed affordable housing incentives, such as the Low Income Housing Tax Credit (LIHTC) and the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002), and extending tax provisions like Section 199A, capital gains. (RER’s Tax Policy Priorities)

Next on The Roundtable's meeting calendar is the all-member State of the Industry (SOI) Meeting, which will include policy advisory committee meetings, on January 22-23, 2025 in Washington, DC. 

The commercial real estate sector is at a critical inflection point, with numerous positive indicators signaling substantial progress on recovery and growth since the pandemic's initial disruption to the industry.

Key factors driving the change are easing interest rates, continued return-to-office momentum, property conversions and rising office demand from tech and AI sectors, though some challenges remain.

Driving Factors in CRE’s Recovery

• Interest rates have continued to ease, with the Federal Reserve cutting rates by another 0.25 percentage points last week. While inflation has shown some lingering signs of persistence, Fed Chair Jerome Powell indicated that interest rates are likely to continue to come down slowly and deliberately in the coming months. (Roundtable Weekly, Nov. 8, AP, Nov. 14)

• CRE lending has also improved, with buyers and owners taking advantage of lower interest rates. Total commercial and multifamily originations increased by 59% year-over-year across many property types including healthcare, retail, multifamily and industrial, though office lending remains relatively stagnant. (GlobeSt, Nov. 12) (Bisnow, Nov. 11)

• Office leasing has seen an uptick, with several major brokers, including JLL and CBRE, reporting significant increases in office leasing revenue. Larger lease sizes and a rising return-to-office trend have been key contributors, with the average number of in-office days required per week by employers up 50% compared to last year​. (CoStar, Nov. 11)

• Regional office visit data indicates that October 2024 was the busiest in-office month since the pandemic for major hubs like Atlanta, Dallas, Houston, Denver, Washington, D.C., Chicago, and San Francisco. (GlobeSt., Nov. 15)

• Office leasing has been further buoyed by growing demand from tech and AI companies. Tech firms leased 9.9 million square feet of U.S. office space during the third quarter, the highest level in nearly three years—supporting activity in high-value office locations such as San Francisco, Seattle, and New York. (WSJ, Nov. 12)

Property Conversions

• Property conversions have been a bright spot in 2024, with 73 projects already completed this year and another 30 scheduled to be completed by year-end.

• The vast majority are office-to-residential conversions—71 million sq. ft., or 1.7%, of U.S. office inventory was planned for or already undergoing conversion, helping to increase the supply of housing, boost downtown vibrancy and ease office vacancy rates. (CBRE, Nov. 11)

What’s Next: RER’s Real Estate Capital Policy Advisory Committee (RECPAC) will be meeting in person next week on November 19, 2024 in New York to discuss the economic outlook, capital and debt markets and much more.