A $1.4 Trillion Meltdown Underway
and...
The CRE Solution
|
First, we had the housing crisis. Now, we have a $1.4 trillion commercial real estate (CRE) meltdown just underway in the U.S. Without swift intervention, the CRE crisis will cripple the economic recovery, raise unemployment, and lead to scores of small business and community bank failures. To avert this crisis, Architecture 2030 recommends that Congress implement the ‘CRE Solution’, providing a tax deduction tied to specific energy reduction targets that will create 1.3 million jobs while restoring credit capacity and liquidity in the CRE market. |
|
 |
The Problem
Commercial Real Estate transactions have dropped a staggering 90% since 2007. Between now and 2014, $1.4 trillion in CRE loans will be coming due; half of these currently are underwater. Commercial property values have plummeted by more than 40%,
and commercial vacancies continue to increase. In addition, the construction industry has lost over two million jobs, including 35,000 last month, mostly in the commercial sector.
The CRE Solution
To restore credit capacity and liquidity in the CRE market and create 1.3 million construction-related jobs, Architecture 2030 recommends implementing the
CRE Solution, a three-year commercial building tax deduction for meeting the energy reduction targets of the 2030 Challenge, as follows:
| Existing Building Renovations | New Building Construction |
|
3-Year |
Minimum Energy
Reduction Target |
Maximum annual tax
deduction per square foot
of floor area |
Percentage
better than
ASHRAE 90.1-2004 |
| $4.50 |
30% |
| $6.00 |
50% |
| $7.50 |
75% |
| $9.00 |
Zero-Net-Energy |
|
3-Year |
Minimum Energy
Reduction Target |
Maximum annual tax
deduction per square foot
of floor area |
Percentage
better than
ASHRAE 90.1-2004 |
| $3.00 |
30% |
| $4.50 |
50% |
| $6.00 |
75% |
| $7.50 |
Zero-Net-Energy |
|
The CRE Solution Impact
- Creates 1.3 million jobs, quickly and cost-effectively,
- Increases after-tax cash flow and property values, and reduces loan defaults,
- Increases CRE desirability and investment value,
- Increases new CRE sales (narrows the gap between the bid
and ask price of CRE property),
- Decreases building energy consumption, greenhouse gas emissions,
and operating costs, and
- Generates billions of dollars in federal, state, and local tax revenue.
To learn more, download the CRE Solution,
here (.pdf).
For a comprehensive online summary, click
here.
The Commercial Sector...
Not What You Think
There are over 4.7 million commercial buildings containing 78 billion square feet of space in the U.S. today. These properties are commonly assumed to be large multi-story, multi-tenant-occupied buildings; however, as these three graphs illustrate, this is clearly not the case (click on images to enlarge):
Commercial Buildings: Percentage by Size
Source: U.S. Energy Information Administration
Commercial Buildings: Percentage by Stories
Source: U.S. Energy Information Administration
Commercial Buildings: Percentage by
Number of Establishments
Source: U.S. Energy Information Administration
|
The majority of the CRE market consists of smaller one- and two-story buildings, many of which are either owner-occupied or single-tenant occupied.
This category of buildings is easier, less expensive, and faster to renovate than the big box stores and skyscrapers more typically associated with commercial real estate.
To learn more, download the CRE Solution,
here (.pdf).
For a comprehensive online summary, click
here.
