Joe Biden's Ambitious Building Upgrade Plan Would Bring Surge In Jobs, Regulations

The commercial real estate industry has pushed toward sustainability for years, but the upcoming presidential election could determine whether those efforts get a shot in the arm or continue piecemeal.

If President Donald Trump stays in office, it would likely mean four more years of local decision-making power and limited environmental regulations. If former Vice President Joe Biden wins the White House in November and his aggressive sustainability platform is adopted, it would mean retrofitting 4 million buildings across the country, creating thousands of CRE jobs in the process.

Some in the industry view added environmental regulations as a headache or governmental overreach, but the push could be well-timed: The nature of the office and building design are already going through pandemic-fueled upheavals.

“This is a time where a lot of owners and tenants are rethinking their needs for the near term and the long term. It's really an opportunity for commercial real estate to reinvent itself,” said Elizabeth Beardsley, the senior policy counsel for the U.S. Green Building Council. “It's going to be a big transformation in a positive way.”

The building upgrade program is just a portion of Biden’s $2 trillion sustainable infrastructure and clean energy plan, which would include improving the nation's roads and bridges and would expand regional and national railroad and transit systems.

Biden contends that push will create millions of new jobs, especially those critical to the commercial real estate industry.

“When we look at how/if [Biden's] plan can, in fact, produce jobs, it absolutely can. This sort of focus will create jobs in engineering, design, construction, technology and other highly skilled trades,” Rastegar Property Co. founder Ari Rastegar wrote in an email. “While we may be seeing businesses closing, there will certainly be an economic rebound with a major emphasis on rebuilding our cities.”

Rastegar, whose Austin-based real estate firm is developing some 5M SF of commercial properties, donated more than $2K last year to Trump and his re-election campaign, according to the Federal Elections Commission database.

HOK senior principal Anica Landreneau lauded Biden's plan for addressing one of the key causes of carbon emissions in most major cities: the built environment. Buildings account for 50% to 75% of the carbon emissions in the average city, said Landreneau, the global design firm's director of sustainable design who testified before a congressional climate subcommittee last year.

Without a mandate, landlords only upgrade an average of 1% to 2% of commercial building stock globally each year, she said.

“You cannot hit a major carbon commitment … without addressing those buildings,” Landreneau said.

As part of his platform to reach a neutral carbon footprint in the U.S. with clean energy, Biden vows to create a national set of building standards, replacing the state and local patchwork of emission standards for buildings — if they even exist.

Biden also is promising $46B to modernize schools and early learning facilities, expand rail and rapid transit across the country in what he called a “second great railroad revolution,” fixing and upgrading crumbling national infrastructure and spurring the creation of more than a million affordable housing units, especially ones tied to mass transit. These efforts will attempt to spur on the reliance on alternative energy sources as well.

While details on how Biden plans to fund these initiatives are still somewhat vague, the longtime Delaware politician has said he would raise the corporate income tax rate from 21% to 28%. Biden is already targeting eliminating the 1031 exchange program to fund child care and senior care programs.

“We're not just going to tinker around the edges. We're going to make historic investments and seize the opportunity and meet this moment in history,” Biden said during a speech in Wilmington, Delaware, in July.

Upgrading that many buildings in four years is an ambitious goal, Beardsley said, and the government would need to support job training and other programs to ensure that the workforce is large enough to handle the surge in demand.

“We need ambition,” she said. "We need to get there. We're behind.”

Beardsley said most of the effort by developers and landlords toward carbon reductions has been focused on the newest and most expensive developments. Biden’s plan would incentivize owners of older buildings to invest in efficiency improvements, she said.

“There's a whole class of owners who may not have the capacity to take advantage of the savings,” she said. “We need to be able to reach them more effectively.”

Trump has a few goals that fall under the umbrella of sustainability over the next four years on his campaign website, including building "the world's greatest infrastructure system," "access to the cleanest drinking water and cleanest air" in the world, and partnering with other nations to clean up oceans.

Trump also touts his accomplishments during his first term, including allocating $50B for rural infrastructure, broadband, waste and power needs. Eighty percent of the funds in that program were funneled to state governors to distribute how they saw fit.

During his presidency, Trump has focused on expanding the country's production of fossil fuels, as well as rolling back many federal regulations that his campaign claims saved $570M a year to the federal government.

Trump moved to withdraw the U.S. from the Paris Climate Agreement, an international accord in which signatory countries agreed to roll back their national emissions, expected to take effect next month. It will join Iran, Iraq, Turkey and Libya as nations that aren’t formally part of the deal.

The Trump administration says staying in the international coalition would cost the U.S. economy nearly $3 trillion and 6.5 million industrial sector jobs by 2040. Biden has said the U.S. would rejoin the agreement if he is elected.

Keith Munsell, a master lecturer at Boston University's Questrom School of Business, said Trump's reliance on local government decisions on sustainability “completely whiffed.” Without a national mandate, developers will be reluctant to fund sustainability efforts.

“I think everybody wants to work in a sustainable environment. Everybody wants to work in a carbon-neutral building, but nobody wants to pay for it,” Munsell said. “I think Trump has no sustainability agenda, and Biden does. I don't see Trump's sustainability agenda at all.”

Another four years of a Trump administration will likely produce the same: local governments and private companies determining their own course toward sustainability.

“We would continue to have to carry the mantle of leadership at the local level. That's not the ideal scenario. We would like to see some policy happening in concert,” Landreneau said. “That should level up to the national level.”

Despite the surge in activity that may be sparked by a Biden plan, industry concerns linger around it, primarily over the burden of new regulations. Regulations, even at local levels, can inhibit developers and engineers from finding ways to accomplish energy efficiency in better ways, and national standards could amplify that problem, Association of General Contractors Vice President Jimmy Christianson said.

“We obviously want a level playing field. We want clear and standardized rules,” Christianson said. “But we also want the ability for our members to innovate.”

Munsell said Biden's timetable, updating millions of buildings and public structures with a set of national standards within four years, could be difficult to accomplish, especially in a contentious political environment.

“That would take some time because now you're talking [about] states rights vs. federal government,” Munsell said. "And that would take some time to implement, if [it got implemented] at all.”

Regardless of who wins the election next month, the trend toward energy efficiency has enough momentum to keep chugging along. Much of that has to do with the private sector. CBRE, the world’s largest commercial real estate brokerage, participated in a $157M funding round in UK startup Redaptive, which helps landlords find cheaper ways of reducing a building’s carbon output, Bloomberg reported.

Insurance companies and lenders are increasingly becoming aware of the dangers posed by extreme weather events, which scientists say will happen more frequently as the climate changes.

“Some investors are starting to make decisions on whether to invest, or continue investing, in markets particularly vulnerable to the impacts of climate change,” ULI officials said in a climate change impact report this year.

There were 40 disasters in 2019 that each cost at least $1B in losses, according to the ULI report. Worldwide, the losses from extreme weather events between 2010 and 2020 have added up to more than $3 trillion, a trillion dollars more than the previous decade.

The worsening climate — 2020 has already brought record-breaking hurricane and wildfire seasons — has investors buying assets in cities that are more proactive on infrastructure and policies directed at buffering themselves against the effects of extreme weather. That makes sustainability transcend politics overall, Landreneau said.

Atlanta developer Integral Group CEO Egbert Perry said climate change is part of a “terrible trifecta” — along with the healthcare crisis and racial strife — that has more investors focusing on putting money behind companies and projects that are addressing those issues.

“We have ignored a lot of issues. We've gone into denial. We have stayed away [from] dealing with tough challenges in hopes that they'd go away,” Perry said during a Bisnow webinar. “This five- to 10-year period we’re in now, say 2020 to 2030, represents a deciding moment for us. If we do not find a way of compelling our elected officials to recalibrate, then I am afraid we may find ourselves on the wrong side of the tipping point.”

Rastegar said that is evident even in a red state like Texas, which has adopted wind power and solar power alternatives.

“This has been achieved under both prior administrations of Obama and Trump, showing that even under a president who is opposed to renewable initiatives, sustainable building can thrive as long as the environment is business-friendly,” he said.

“It's a bottom-line issue,” Landreneau added. “Energy efficiency in buildings is popular on both sides of the aisle. It's not just driven by mandates.”