White House Mounts Dual Attack on Commercial Real Estate Issues

November 28, 2023 • By John Salustri

“Office and commercial vacancies around the country are affecting urban downtowns and rural main streets.” That frank assessment  of the commercial real estate sector’s current woes came from the Biden-Harris White House in late October, as the Administration stepped in to help incentivize affordable housing construction through the conversion of troubled “commercial” assets.  

The driver of change is a three-pronged effort that builds on the Administration’s Housing Supply Action Plan, designed to cut housing costs while boosting the available inventory, promoting fair housing and addressing related climate issues. 

Not that commercial real estate practitioners needed a reminder, but the Council of Economic Advisers reports that the office sector has hit a 30-year national high in vacancies, while we struggle with a decades-long “shortage of affordable housing units.”

According to Randal Froebelius, BOMA Fellow and president and general manager of Equity ICI Real Estate Services, the White House approach to the problem is not unlike a similar initiative  launched by the City of Calgary. That city’s Downtown Office Conversion Programs have to date created more than 2,300 homes from converted assets with plans to “remove” (in the words of the website) six million square feet of vacant office space from the city by 2031. So popular has the program been that in October, the city hit the pause button on further applications, having already exhausted available funding.

Back in the States, the three essential legs of the White House conversion stool are: 

Providing new guidance on funding for transit-oriented development; 
Issuing a Guidebook listing more than 20 federal funding programs; and
Incentivizing the partnership of the private sector with various municipalities.  

The involvement of the government in the private sector could be the source of discomfort for free-enterprise mavens, opening a possible Pandora’s Box of regulatory oversight. While Froebelius sees the concern, he remains unfazed. 

Yes, on one hand, he says, “The problem is that, since you’re getting incentives you need to comply.” And yes, left to their own devices, “No one is more creative, more innovative and more efficient than commercial real estate developers.”

At the same time, he continues, the enormity of the problem transcends a private-sector focus. “The issue touches on so many different concerns,” he says, “such as infrastructure and sustainability and the integration of culture and business.” This is an issue focused on more than just vacant office buildings, but indeed, “our vacant downtowns, where businesses are suffering from a lack of clientele both during the week and on weekends. 

“This,” he concludes, “is more than just a real estate problem.”
# # #