On April 28, 2021, President Joe Biden unveiled his historic proposal to create millions of jobs and rebuild large parts of the country’s infrastructure through the “American Jobs Plan” (AJP). If passed, this $2.3 trillion proposal will have a tremendous impact on the country, including some immediate and lasting benefits for the commercial real estate sector.
How the American Jobs Plan Will Impact Commercial Real Estate
The AJP proposes to inject $213 billion in funding for the renovation and construction of 2 million commercial buildings and homes over the next decade. There is also a provision included called the “Neighborhood Homes Investment Act,” which promises to deliver tax credits worth $20 billion over five years for developers and investors to rehabilitate or build low to middle-income housing. What does this have to do with commercial real estate? New homes need support services like retailers, schools, and hospitals, so there will be additional opportunities in these spaces.
Funding Sources for the American Jobs Plan
Several trillion dollars is a lot of funding. The federal government plans to finance this massive investment in American infrastructure through some fundamental changes to this country’s tax code. While many aspects of the AJP could have a positive impact on the commercial real estate market, there is a chance that some of the provisions could negatively affect a handful of real estate businesses and investors.
Some corporations will likely be subject to a new alternative minimum tax. But a consequence of this is that the tax benefits enjoyed by Real Estate Investment Trusts (REITs) could soon become even more valuable. The AJP might also eliminate the deferral of tax payments on gains over $500,000 when there are 1031 “Like-Kind” exchanges, which could impact real estate investors going forward.
Other Benefits to Commercial Real Estate Sector
One of the aims of the AJP is to stimulate the economy while also doing something positive for the environment. The plan is designed to provide funding for major transportation and infrastructure projects. Aside from real estate investors, many of the beneficiaries will include the materials suppliers and transportation networks that move goods around the country.
When it comes to transportation projects like light rail, specifically, the areas that have built these have historically created new housing and business opportunities. The plan also extends a manufacturing tax credit, which provides incentives for qualified investments that produce clean energy or contribute to lower greenhouse gas emissions. Greater investments in manufacturing are expected to boost demand for industrial and commercial space.
Looking for Commercial Real Estate in South Carolina?
The coming year promises positive developments for the commercial real estate space. If you are looking for property or management services in this area, you need a partner you can trust. Caldwell Commercial Real Estate has highly experienced realtors and property managers who will meet your needs and help you make adjustments as your requirements change. Contact us today to learn more about our services.