September 30, 2024
Federal Action Needed, Say Commercial Building Groups
With commercial building sector “in crisis” groups call on next administration to adopt new policies
A coalition of leading sustainable building organizations has released a comprehensive policy agenda for the next U.S. administration, focusing on strategies to help the commercial real estate sector navigate current challenges and prepare for future growth.
The coalition—comprising the U.S. Green Building Council (USGBC), New Buildings Institute (NBI), Institute for Market Transformation (IMT), and Carbon Leadership Forum (CLF) — calls for an expanded role for the federal government to support commercial building resilience, environmental sustainability, and economic competitiveness. Among their key recommendations is an expansion of the Sec. 48E Clean Electricity Investment Tax Credit (ITC) to cover energy efficiency investments.
Addressing Economic and Environmental Pressures
The groups emphasize that the commercial real estate sector is facing mounting challenges, exacerbated by the aftermath of the pandemic. High interest rates, declining occupancy levels, and rising insurance and construction costs are straining property owners and developers across both urban and rural areas. These pressures are leading to reductions in tax revenue and negatively impacting local economies.
The sector’s challenges also intersect with environmental concerns, as commercial buildings are responsible for approximately 17% of total U.S. energy consumption and 15% of greenhouse gas emissions. With aging infrastructure and increased exposure to extreme weather events, the need for resilience in this sector has never been more pressing.
Federal Role in Supporting Energy Efficiency
While the Investment Tax Credit currently applies to on-site clean electricity generation technologies like solar and geothermal, the proposed change would extend these benefits to energy efficiency improvements, which would include investments in lighting systems. This expansion, known as the Energy Efficiency Investment Tax Credit (EE-ITC), would incentivize building owners to invest in energy-efficient technologies, potentially driving significant activity in lighting retrofits and upgrades.
Above: Excerpt from Reviving America’s Commercial Building Sector: 2025 Efficiency & Resiliency Policy Agenda
Though the government communication doesn’t specifically reference lighting, it does cite “energy management systems.” This policy change could lead to a wave of energy-efficient lighting and controls projects across the commercial real estate sector, contributing to lower energy costs and emissions.
Tax Incentives for Office-to-Residential Conversions
Another aspect of the agenda is the proposed tax incentives for converting underused office spaces into residential units. The shift to remote work has left many office buildings with high vacancy rates, while housing shortages continue to grow in many areas. Tax incentives for such conversions could help address both issues, providing new opportunities for the lighting industry.
Office-to-residential conversion projects often require extensive lighting redesigns to meet the different needs of residential spaces. This opens potential business opportunities for lighting products and services, from energy-efficient fixtures to smart lighting systems that enhance indoor living environments.
These conversion incentives could be applied through amendments to existing tax laws, such as the Sec. 48 Clean Electricity Investment Tax Credit or the Sec. 179D Energy Efficient Commercial Building Tax Deduction, with the intention of supporting projects that incorporate energy-efficient, resilient, and sustainable designs.
The policy recommendations outlined by USGBC, NBI, IMT, and CLF reflect a plea to the U.S. government to help revitalize the commercial real estate sector. They urge the next administration to implement policies that not only help commercial buildings adapt to economic challenges but also reduce their environmental impact and improve public health. By expanding tax incentives, promoting energy efficiency, and encouraging building conversions, these measures aim to address the current crisis while preparing the sector for future growth.
