By Aquiles Suarez
This week will see scores of NAIOP members from the U.S. and Canada attend NAIOP’s Chapter Leadership and Legislative Retreat (CL&LR) in Washington, D.C., with U.S. members scheduling meetings with their senators and representatives to educate elected officials on the issues important to the commercial real estate industry. Our annual CL&LR is an important event and is the kickoff to what is certain to be a consequential year for commercial real estate in terms of federal legislation. Just as important as the substance of the issues that will be at the center of the discussion during NAIOP’s Capitol Hill meetings are the relationships that exist and are fostered between elected representatives and their local NAIOP constituencies. The message coming from NAIOP members who are also constituents tend to leave a lasting impression with elected officials and their staff.
On their Hill visits, NAIOP members will bring up specific local issues and matters important for their senators and representatives to know regarding their markets. But all chapters will also deliver a common message regarding the top legislative priorities at the federal level. This year, NAIOP’s federal legislative priorities which will be a focus of our meetings are:
- Tax Policy. Many of the current provisions in the tax code important to commercial real estate originally include in the Tax Cuts and Jobs Act of 2017 (TCJA) will expire at the end of this year unless renewed by Congress. Renewal of TCJA will be the top legislative action for Congress this session. In addition to tax rates on ordinary income, provisions that will expire if Congress does not act include the Section 199A deduction of 20% for real estate partnerships and other pass-through entities and the deductibility of interest on business debt. Bonus depreciation will also continue to be reduced from its original 100% level. At a time when Congress will be debating a major tax bill with many of President Donald Trump’s campaign promises being considered, as well as the priorities of other industry groups being at risk, NAIOP members’ Hill visits are coming at a critical time. Lower capital gains tax rates, Section 1031 like-kind exchanges, and carried interest continuing to be taxed at capital gains rates are all issues that elected officials will have to decide when weighing how to pay for the legislation.
- Adaptive Reuse. In 2024, NAIOP successfully advocated for the introduction of legislation that would create a federal tax incentive to spur the conversion of vacant or underutilized commercial buildings to residential usage. The work-from-home trends that arose in the aftermath of COVID-19 and the hybrid-work patterns that have in large part continued led to high-vacancy rates in much commercial real estate in many communities. The economic consequences were dire for many communities. Depressed market values mean lower property taxes. Less employee foot traffic reduced economic activity and hurt small businesses. While Class A buildings have rebounded to some extent, many Class B and C buildings with low occupancy levels are likely to become stranded assets. The Revitalizing Downtowns and Mainstreets Act, introduced in the last Congress by Representatives Mike Carey (R-OH) and Jimmy Gomez (D-CA), would establish a 20% tax deduction for the eligible costs of converting a commercial building to residential. NAIOP members continue to advocate for the introduction of the legislation in this Congress and for its ultimate passage.
- Energy and Electricity. The emergence and projected importance of artificial intelligence (AI) in our economy have focused attention on the surging demand for electricity. For the last two decades, the demand for electricity in the U.S. was fairly constant. With the emergence of artificial intelligence and its need for more power-hungry data centers, coupled with the buildout of electric vehicle chargers, onshoring of manufacturing, and widespread electrification mandates in many cities and states, our current electrical infrastructure and energy policies are inadequate to meet the challenge. The lack of future availability of electricity for major projects within an economically reasonable timeframe is already hindering potential development. In their meetings with elected officials and their staff, NAIOP members will highlight the importance to the industry of having a comprehensive energy policy that addresses energy generation, transmission and distribution, and provides for increased investment in electric grid modernization.
Of course, our federal priorities are not the only matters of importance for our advocacy. Policies affecting the ownership of federal lands, wetlands permitting, and housing, to name a few, are also discussed in our meetings with elected officials. This week began with the Trump administration imposing and then delaying steep tariffs on Mexican and Canadian imports, and going ahead with tariffs on China, which engendered much discussion. Depending on the eventual outcome, the impact on commercial real estate and the broader economy could be significant. NAIOP and its real estate allies will be engaging with policymakers in both the executive and legislative branches to provide our input. On these and other issues, this week’s CL&LR marks the beginning of an important year of engagement with our elected leaders.
