How Will the IRA Impact Commercial Real Estate?

A review of the Inflation Reduction Act's sizeable tax deductions and credits to help subsidize energy-efficient buildings and renewable energy generators including solar, energy storage, and EV chargers.

While you’ve no doubt heard about the Inflation Reduction Act (IRA), it may have evaded your sphere of concern as something only relevant to those focused on battling economic inflation or combating climate change. You may want to take a second look, though, as the bill has major considerations for the commercial real estate (CRE) industry. Since the bill is broad and its implications far-reaching, we will focus only on the bill’s impacts to CRE and exclude consequences related to domestic manufacturing, single-family residences, medical costs, etc. If you are a commercial or multifamily property owner, property manager, developer, or investor in CRE, this article will be of particular interest to you.

The IRA (H.R. 5376) was signed into law by President Biden this past August, allocating $369 billion toward a myriad of strategies for reducing carbon emissions, with a particular focus on aiding poorer communities.

It’s difficult not to notice the constant increase in electricity prices, which reached an all-time high in the first half of 2022 as a result of record high fossil fuel costs as well as inflation. Those in the CRE industry know that operational expenses can make or break a bottom line. The IRA aims to reduce these expenses by subsidizing both energy efficiency retrofits (to reduce total consumption) and renewable energy installations (to offset the cost of consumption). The bill primarily does this through tax deductions and credits.

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This article was originally published on Globest.com on September 21, 2022.  Link to the original article is here: https://www.globest.com/2022/09/21/how-will-the-ira-impact-commercial-real-estate/?slreturn=20230301182123