Federal Bailout Extends Green Building Tax Credits

Timothy B. Hurst, a writer for Red, Green, and Blue, recently wrote an article about the Feds extension of the Energy Efficient Green Building Tax Deduction that is a part of the $700 billion dollar bail out package:

Energy Efficient Commercial Building Tax Deduction

Extended through December 31, 2013. Section 179D(a) is a deduction for commercial building owners whose buildings meet certain energy standards. The deduction is as much as $1.80 per square foot for buildings that achieve a 50 percent energy savings target.

Section 1331 provides that a building owner may claim a tax deduction for expenditures made as part of a building designed to reduce the total annual energy used in the operation of the building. Building owners can claim a tax deduction of up to $1.80 per square foot of building area for the installation of systems that reduce the total energy and power costs by 50 percent or more when compared with a reference building. The building systems eligible to secure the tax deduction include:

  1. Interior lighting systems.
  2. Heating, cooling, ventilation, hot water systems.
  3. Building envelope systems.
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News from the NAR: The U.S. Ripple Effect on Foreign Investment

This morning the National Association of Realtors released the news report of a rippling effect on foreign investment as a direct result from the mortgage crisis and resulting housing crunch. Here is what they had to say this morning:

As the U.S. begins moving out from under the housing crunch, other world markets are just beginning to feel the “overseas aftershock” of the global financial system, according to the Sept. 4 Business Week online magazine.

http://go-to.realtor.org/r/OJAKQT/QFXCP/4035NG/0VG9E/LRD8D/XL/t

What do bad home loans in Alpharetta, Ga. have to do with office buildings in London or Tokyo? “Plenty,” says Business Week. Global lenders, wary of further credit problems are denying credit to many builders and/or instituting tougher terms on commercial property loans. This, in turn, impacts employment markets, which impact rents and causes developers to rethink plans. The whole global commercial property market has slowed with the value of commercial real estate transactions worldwide at only $306 billion for the first six months of 2008–about half the amount for the same period in 2007, according to Real Capital Analytics.

 
http://go-to.realtor.org/r/OJAKQT/QFXCP/4035NG/0VG9E/UHF7N/XL/t
But it’s not just the U.S. subprime mortgage situation at play.
An overall softer economy and weak consumer confidence has hurt smaller developers–particularly those is markets that heated up quickly, including those servicing U.S. outsourcing (think IT); a U.S. sector that is slowing along the overall economy. In spite of all this, Business Week notes that opportunities exist, especially for those with cash.

Sovereign wealth funds (SWF), which are state-owned entities that manage savings for investment purposes, are key players in commercial real estate and are flush with cash. According to an article in the April Real Estate Forum, SWF have grown from about $500 billion to more than $3 trillion since the 1990s, with projections of tripling that amount by 2012. Go to pg. 10 to read the full article: 

http://go-to.realtor.org/r/OJAKQT/QFXCP/4035NG/0VG9E/MFY6E/XL/t
***End of News Report***

Feds Bail Out Fannie Mae and Freddie Mac

Just an hour ago, Malden Read, a reporter for the Washington Post, annoucned that the Feds are bailing out Fannie Mae and Freddie Mac. According to Read, this move by the Feds, “could aid a recovery of the broken U.S. housing market and arrest a slide in stock and credit markets worldwide.”

Read the full story:

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/08/AR2008090800542.html

Commercial Real Estate Easing in Economic Slowdown

According to an article on 06/18/08 by Walter Molony, a writer for the Commercial Real Estate Outlook division of the National Association of Realtors, the commercial real estate market is starting to feel the affects of the credit crunch:

Commercial real estate vacancies are trending up modestly, while investment has dropped sharply in the wake of the credit crunch, according to preliminary information for the latest COMMERCIAL REAL ESTATE OUTLOOK* of the National Association of Realtors®.NAR Chief Economist Lawrence Yun said economic weakness is impacting commercial real estate. “Although the supply-demand fundamentals are broadly favorable in most commercial real estate markets, vacancy rates are rising modestly and rent gains are slowing,” he said. “Slow economic growth is lowering demand for commercial space, mostly in the office and industrial sectors. Despite the slowdown, the commercial real estate market is in much better shape compared to conditions during the 2001 recession.”
Patricia Nooney of St. Louis, chair of the Realtors® Commercial Alliance Committee, said credit has been a problem. “Tight credit availability has significantly slowed the volume of commercial real estate transactions,” she said. “Even so, institutional investors, along with foreign investors who are encouraged by the drop in the dollar, remain active in the current market. Because conditions are so varied across the country, we recommend investors or businesses looking for space consult with Realtors® in their area who specialize in commercial real estate.”Investment in commercial real estate during the first four months of 2008 was $48.2 billion, down 69.5 percent from $157.8 billion during the same period in 2007 when the credit markets were functioning normally; those totals do not include transactions valued at less than $5 million or investments in the hospitality sector. 

The NAR forecast in four major commercial sectors analyzes quarterly data for various tracked metro areas. The sectors are the office, industrial, retail and multifamily markets. Historic data were provided by Torto Wheaton Research and Real Capital Analytics.

 

Read entire commercial market report by Walter Molony where he discusses the outlook for the following markets: office, industrial, retail, and multifamily.

Eco Biz – SB GREEN BUILDING

State keeps two Seattle construction cranes shut down

In a recent news brief aggregated by LoopNet and originating from the Puget Sound Business Journal, three construction “hybrid” cranes remain closed down after the state L&I Department first closed them down earlier this month. According to a June 5th news article by Sonia Krishnan at the Seattle Times, the state took action because they perceived “potential safety problems.” Krishnan explained that the department cited, “possible electrical and structural issues with the cranes, which were all manufactured by the same Chinese company, Sun Cranes, and distributed by a Texas company” (Krishnan).

Krishnan reported that the decision to close down the cranes came after “an analysis from independent engineers showed the electrical system in all three cranes had not been ‘evaluated and approved for use,”’ which was information she found in a department news release. Krishnan asserted that a faulty system can lead to dropped loads or other problems. Some of the hazzards she cited from the department’s news release included an incident where a worker was “badly burned on one of the cranes in January” (Krishnan). Luckily, these cranes are the only three erected in this state.

According to a July 6th blog by The Faber Law Group, a crane collapsed in Bellevue (2006) killing a person who lived across the street from the construction site. The firm also reported in the aftermath of the incident that the Department of Labor and Industries is drafting a new safety law concerning the regulation of crane operators. However, they mentioned that such a law would not go into effect until approximately the year 2010.

Latest NAR Forecast Indicates Mortgage Market Improving for 2008

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On October 10, a press release from the National Association of Realtors paints an improving picture in the mortgage market. According the press release, senior economist Lawrence Yun said that this improving forecast is due in part to “widening credit availability,” and that “conforming loans are abundantly available at historically favorable mortgage rates.” Other factors cited are the reduction of new home starts, because it reduces the amount of inventory, which Yun claims “will help lower inventory and firm up home prices.”

I should note that buyers who cannot qualify for a conforming mortgage might still experience difficulty obtaining the financing they need to make a home purchase. Speaking with a mortgage consultant and obtaining a mortgage pre-approval ahead of time is always advisable. Knowing your home buying limits in advance will go a long way to reduce—if not eliminate—uncertainty and anxiety at closing.