The president's annual State of the Union (SOTU) speech is high political theater with plenty of red meat served up to the respective bases, no matter what administration.
This annual ritual offers insight not only into the goals of the president but also where particular industries hope to see the economy and legislative calendar go. The commercial real estate industry is no different of course. Some issues the president touched on in his speech--and others he didn't--of interest to the industry included the budget, the establishment of an infrastructure bank, affordable housing and multifamily finance.
Talk of bipartisan measures was still a staple in the speech although the President warned he would accomplish his mission via executive orders if Congress didn't cooperate with him.
The Budget
It wasn’t long into his speech that the President made reference to the bipartisan budget deal that Congress passed last year—a deal that undid some of the severe cuts under sequestration. "Nobody got everything they wanted," the President said, "and we can still do more to invest in this country's future while bringing down our deficit in a balanced way."
The budget deal was perhaps the most significant achievement for the CRE industry and was a welcome addition to the SOTU speech for that reason.
The Government Services Administration posted prospectuses for space needs of several government agencies the day after the SOTU. While they must be approved still by Congress, some of the requests point to an agency that is thinking beyond mere space reduction.
There’s a prospectus for the Transportation Security Administration's headquarters. That was an agency created hurriedly in the aftermath of 9-11, meaning it grew quickly without much forethought and now exists in multiple locations.
A prospectus for the Federal Energy Regulatory Commission proposes staying in its existing building, where there is a favorable purchase option. It is clear they will take an ownership position in the building in 10, 15 years from now.
But consolidation and reduction of space is also part of the mix.
The National Institutes of Health's prospectus is more in line with traditional requests and the FBI Headquarters Consolidation project figures in one of these prospectuses.
Some of the other proposals, according to the GSA website:
The current lease at 1400 L Street, NW, Washington, DC, for the Department of Homeland Security's Customs and Border Protection expires on August 31, 2015. It currently occupies 140,560-square-feet and the prospectus proposes reducing it by 31,560 square feet.
GSA is proposing a replacement lease of up to 86,000-square-feet for the Department of Housing and Urban Development, which is currently located at 550 12th St., SW, in a lease that expires April 25, 2014. This location houses five HUD components. The prospectus proposes keeping four in the location and moving the fifth elsewhere.
A replacement lease of up to 839,000-square-feet is being proposed for the Department of Justice at 600 E St., NW, 1425 New York Ave., NW, 601 D St., NW, and 1331 Pennsylvania Ave., NW in Washington, DC. The office utilization rate will go from 184 usable-square-feet (USF) per person to 130 USF per person, for a proposed reduction of 206,230-square-feet
A replacement lease of up to 157,000-square-feet of space for the Federal Bureau of Investigation, currently housed at 1025 F St., NW was proposed. This lease would replace three existing leases, which expire on January 17, May 31, and November 24, 2015. It is expected that these operations will eventually relocate to the FBI Headquarters Consolidation project, if approved by Congress. Therefore GSA will attempt to negotiate a flexible lease term.
A replacement lease of up to 105,000 square feet was proposed for the Corporation for National and Community Service, located at 1201-1225 New York Ave. NW. The current lease expires October If, 2014. The replacement lease will drop from 151 to 129 usable square feet per person and 226 to 198 USF per person, respectively.
GSA is proposing a succeeding lease of 504,000 square feet for continued occupancy of 888 First St., NE, by the Federal Energy Regulatory Commission and to house another, to-be-determined, federal agency. The building at 888 First Street, NE was originally constructed as a build-to-suit facility to meet the space requirements of FERC and the agency has been the primary tenant at this location since 1995.
GSA is proposing a new lease of up to 345,000 square feet for the National Institutes of Health currently located at 6701 and 6705 Rockledge Dr., Bethesda, MD, and 6100 Executive Blvd, Rockville, MD--leases that expire on February 1, 2014 and June 30, 2015. NIH would improve its office utilization rate from 143 USF per person to 100 USF per person, or 98,764 square feet less than the total of current occupancies.
GSA is proposing a replacement lease of up to 123,000 square feet for the Department of Homeland Security’s National Protection and Programs Directorate. NPPD’s Cybersecurity and Communications office is currently housed in two leases located at 1110 North Glebe Rd in Arlington, VA.
A replacement lease of up to 625,000 square feet for the Department of Homeland Security's Transportation Security Administration has been proposed. It is currently housed in five separate buildings in Northern Virginia, which are set to expire between March 2014 and March 2018. TSA will improve its office utilization rate from 103 USF to 84 USF per person, for 21,859 square feet less than the total occupancy of these operations
The Infrastructure Push
President Obama also revisited his focus on infrastructure although in a more modest fashion than his earlier proposal for an infrastructure bank.
Clearly, though, infrastructure upgrades and investment remain on the Administration's radar. The President referenced the continued need to streamline the permitting process among other measures.
"We'll need Congress to protect more than 3 million jobs by finishing transportation and waterways bills this summer," the President said.
"But -- but I'll act on my own to slash bureaucracy and streamline the permitting process for key projects, so we can get more construction workers on the job as fast as possible."
The President went on to discuss a range of issues of interest to the country from minimum wages to the Affordable Care Act to a proposal for a new retirement plan. He didn’t touch on, at least not beyond the most general terms, was multifamily reform and affordable housing. Their omission gave the industry an opening, though, to voice their own opinions.
Housing Finance Reform
Cindy Chetti, the National Multifamily Housing Council's SVP of Government Affairs, for example said that while the industry appreciated his support of housing in his speech we "would remind him that housing preferences are changing and a growing number of American households are choosing to rent for lifestyle and financial reasons."
For that reason, Chetti said in a prepared statement, "housing finance reform must avoid a 'one-size-fits-all' approach. The multifamily market uses commercial mortgage debt products, and imposing single family reforms would jeopardize our ability to meet the nation’s need for millions of new rental homes over the next decade."
Affordable Housing
The President also made numerous references to low income Americans and what measures he would like to introduce to better support them.
National Low Income Housing Coalition CEO Sheila Crowley, for example, applauded President Obama's call for an increase in the federal minimum wage and an expansion of the Earned Income Tax Credit.
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