Potential policy shifts could significantly reshape the landscape for CRE professionals, including building owners and operators, architects, construction managers, and others. The incoming administration has a different perspective on economic and environmental regulatory approaches to tariffs, climate and energy policies, zoning, and sustainability initiatives.
The expected policy realignment will likely introduce new challenges and opportunities for the CRE industry.
Tariffs and prices on building materials
In a recent policy proposal, president-elect Trump suggested implementing substantial import tariffs on goods from multiple countries, including 60% to 100% on Chinese imports, 25% on Mexican imports, and 10-20% on imports from elsewhere. His previous administration had imposed tariffs on about 10% of U.S. imports, targeting specific product categories like washing machines, solar panels and metals like steel.
Economists worry that such harsh tariffs will not generate an American manufacturing boom but will lead to higher interest rates — and reignite inflation. Many companies, including Stanley Black & Decker and Autozone, have already announced plans to pass increased costs on to consumers.
The economic impact of tariffs could significantly elevate operational expenses within the commercial real estate industry, with CRE professionals expressing concern about the potential financial strain. The industry has yet to fully recover from the pandemic, and higher tariffs could affect everything from maintenance supplies to critical building infrastructure components. Increased tariffs could further complicate efforts to maintain profitability and operational efficiency while navigating higher operational costs in an already fragile market environment.
Tariff policies could also impact housing affordability by increasing the cost of construction materials like wood and concrete. Policymakers balancing market protection and housing accessibility could face an uphill battle.
Loosened zoning regulations
Zoning regulations are experiencing shifts at the local level. Many municipalities, including those in traditionally Democratic-controlled areas like California and Minnesota, are moving toward deregulation and zoning changes to increase housing density. This trend appears to have bipartisan support, driven by the critical need to address housing supply constraints.
Federal policy could potentially accelerate these local changes through strategic infrastructure spending. By leveraging highway dollars as an incentive, the federal government can encourage municipalities to modify zoning restrictions. This strategy offers a powerful mechanism to influence local housing development plans and potentially increase housing density across more regions. The evolving approach to housing policy reflects a nuanced understanding of the complex interplay between federal initiatives, local regulations, and market dynamics.
Tax reform proposals spark concerns over real estate incentives
According to Bankrate, the incoming administration’s proposed tax policy changes include reducing corporate tax rates to 15% (from 21%) and removing restrictions on state and local deductions. A key consideration for the CRE sector? The future of pass-through taxation which allows property owners to apply corporate tax rates to real estate profits through their personal tax returns.
Funding mechanisms for these tax cuts raise concerns among industry experts. Any leadership transition typically involves shifting budget priorities, requiring revenue adjustments elsewhere. Renewable energy initiatives, including solar panels, heat pumps, EV infrastructure incentives, and others, could face reduced funding to offset these tax reductions. (You can still take advantage of these credits now. Check out the Energy Department website for more information.)
Don Davis, BOMA International’s VP of advocacy and building codes, has expressed concern because states have enacted state-based utility energy targets and building performance standards. Currently, the federal government provides tax assistance, grant assistance, or green loans from SBA to implement these state mandates. The potential loss of this federal support could impact compliance with state-level requirements, as states typically don’t fund these programs.
Shifting priorities for energy and climate change
The CRE sector has made significant progress in sustainability initiatives, particularly in energy distribution and efficiency through renewable energy adoption and storage solutions. However, policy uncertainty introduces challenges for long-term planning toward 2035 and 2050 environmental targets. Between 2016 and 2020, the first Trump administration attempted to roll back over 125 environmental protections. The industry needs stable policy direction to implement and develop necessary technologies effectively.
Significant shifts in environmental policy in the second Trump administration could negatively impact climate initiatives. Key changes include:
- Budget reductions at environmental regulatory agencies
- Potential leadership changes favoring fossil fuel development
- A prioritization of conventional fuel sources
- Reduced support for renewable energy sources
- Reallocation of existing climate-focused funding toward traditional energy sectors
However, bipartisan discussions on infrastructure modernization, particularly about electrical grid improvements, show promise. Current grid systems based on century-old technology require significant updates. Industry organizations are exploring innovative solutions like distributed energy systems combining microgrids with storage and renewable technologies.
Impact on commercial building efficiency and sustainability
Trump’s Agenda 47 includes plans to repeal the 2022 Inflation Reduction Act (IRA). The proposal claims that expanding fossil fuel development would benefit the economy and employment. Conservative policy organizations, including those with ties to the previous administration, advocate for eliminating the IRA and its unspent allocations.
Energy market experts warn that removing clean energy tax incentives could have widespread economic implications, affecting business costs, inflation rates, and employment in construction and manufacturing sectors.
A key provision of the IRA enhanced the Section 179D Energy Efficient Commercial Building Tax Deduction. For buildings in service since 2023, this provision allows deductions of $0.50 per square foot with 25% energy savings, plus $0.02 per square foot for each additional percentage point up to $1 per square foot at 50% savings. Projects meeting specific wage and apprenticeship criteria can qualify for up to five times these amounts. Buildings built before 2023 have a maximum deduction of $1.80 per square foot for 50% energy savings.
Industry analysts emphasize the importance of these deductions for improving building efficiency and reducing operational costs. Federal programs through the Energy Efficiency and Renewable Energy Office have supported various building improvement initiatives, including the:
Historical data show that despite previous policy changes — including import tariffs — the adoption of clean energy increased during the first Trump administration. Because of their economic benefits, many IRA building-related provisions still enjoy bipartisan support. A brief from Crux and Power Brief examining the impact of the 2024 election on IRA tax credits for stakeholders suggests that Republican and Democratic districts will work together to maintain at least some of these incentives. Should federal incentives decrease, sustainability efforts may shift to the state and local levels. Experts note that regional governments have historically led climate initiatives during periods of federal policy uncertainty.
Are you a commercial real estate investor — or looking for a specific property to meet your company’s needs? We invite you to talk to the professionals at CREA United, an organization of CRE professionals from 92 firms representing all disciplines within the CRE industry, from brokers to subcontractors, financial services to security systems, interior designers to architects, movers to IT, and more.
