By Jack Hargrove
As September drew to a close, NAIOP chapter leaders from the Northeast gathered for a summit to learn about and discuss the policy issues facing commercial real estate in the region. Representatives from Detroit, Greater Philadelphia, New Jersey, Massachusetts, New York City Metro and Pittsburgh met in Philadelphia to hear from five speakers with policy expertise. The sessions followed a discussion format where attendees could freely ask questions and share the particular concerns of members from their respective chapters.
Frank Canavan, director of state affairs at the American Gas Association, led the opening session on the topic of building energy performance standards (BEPS). BEPS are policies that require buildings to meet certain energy use metrics in pursuit of reduced greenhouse gas emissions. Currently, Colorado, Maryland, Oregon, Washington and numerous municipalities have BEPS, and other states have proposed them. These policies often function as de facto natural gas bans, forcing buildings to electrify after years of capital expenditure. Canavan also discussed ongoing lawsuits against BEPS in Colorado and Maryland being led by NAIOP chapters. This session ignited a lengthy discussion among attendees, signaling that this is a major issue faced by our members.
Keeping the focus on energy, the second session addressed how to meet the increased demand for energy. The discussion was led by Zach Greene, manager of strategic engagement at the North America Electric Reliability Corporation (NERC). NERC is the certified Electric Reliability Organization that assures the effective and efficient reduction of risks to the reliability and security of the North American bulk power system. In 2024, NERC conducted its Long-Term Reliability Assessment to forecast the reliability of the electric grid over the next 10 years. It found that over half of North America is at risk of energy shortfalls in the coming decade. This is largely attributable to the projected increase in energy demand due to electrification, data centers and industrial load. To ensure reliability, the U.S. will need to find ways to ensure that energy supply can meet this demand. Attendees discussed how NAIOP can promote increased energy generation in their home states across the Northeast.
The summit’s next session pertained to the topic of goods movement and featured Ean Johnson, vice president of economic and industrial development at OmniTRAX. OmniTRAX is a rail and real estate development firm that operates 31 railroads, a network of over 2,000 miles, and more than 10,000 acres of developable industrial land. Johnson discussed various policy ideas to promote the development of rail infrastructure, using the Strategic Industrial Development Enhancement (SIDE) tax credit in Oklahoma as an example. He also presented a case study of CMC Steel in West Virginia as an example of a successful OmniTRAX project with an industrial development. The topic of goods movement was of great interest to attendees because where rail development goes, warehouse development follows. Attendees also discussed how commuter rail can affect real estate, such as through transit-oriented development policies.
Next, Trey Richardson, executive director of the Community Tax Coalition (CTC), led a session on real estate transfer taxes. Transfer taxes are a fee charged by governments on the sale of real property. They hinder real estate development while not generating the expected tax revenue. At present, 37 states have real estate transfer taxes. One notable example that provides a useful case study is Measure ULA, a transfer tax enacted in Los Angeles in 2022. Not only does it generate only half of the predicted revenues, but it has also caused a 74% decline in the number of real estate transactions over $5 million. The CTC aims to provide information and guidance to communities that are fighting transfer taxes. To that end, it commissioned a study from Sage Research Group. NAIOP’s Associate Vice President of State and Local Affairs Toby Burke serves on the CTC’s Advisory Board.
The summit concluded with a presentation on the economic outlook of the Northeast region from Ryotaro Tashiro, outreach economist and advisor at the Federal Reserve Bank of Philadelphia. His presentation focused on three broad areas: general economic outlook, labor market outlook and inflation. For the general economy, he noted that consumer confidence has been persistently low and that there is evidence of slowed growth since 2024. The labor market also demonstrates signs of cooling, with the unemployment rate slowly climbing and office vacancy rates at a 20-year high. Inflation has begun to slow but it is still above target, and consumer inflation expectations remain elevated. Attendees discussed the extent to which these indicators appeared in their communities.
NAIOP Corporate will continue to host similar summits to bring chapter leaders together for important policy discussions. Issues often spread from state to state within a region, and events like this create connections that help the commercial real estate industry more effectively promote pro-growth policies.
