We assembled a panel of industry experts to tackle this month’s question.
Here’s what they had to say.
Jeremy Farrell, senior director, LeFrak (Jersey City)
The current economic conditions are the worst I have seen and while Congress can help, we need more attention at home. New Jersey needs to immediately adapt policies to attract and retain businesses. A key component of this new framework needs to be making the state more competitive in its regulatory and fiscal structure. This means big things like looking at taxation and being more surgical in the taxation strategy and small things like removing logistical and bureaucratic hurdles to starting and operating a business in the state. Predictability is key to operating a successful business. Currently, between the antiquated and piecemeal processes involved in operating a business along with the constant changing legislative and regulatory rubric, a shockwave is sent to businesses saying: ‘Don’t do business here.’ It’s an uncertainty tax increasing the cost of doing business in New Jersey, which already has a significant cost associated with it.
Eliezer Gross, director, real estate tax, Wiss (Florham Park)
The Coronavirus Aid, Relief and Economic Security (CARES) Act clarified the Tax Cuts and Jobs Act of 2017 to state that Qualified Improvement Property, or QIP, is eligible for 100 percent bonus depreciation if placed in service before Jan. 1, 2023. Prior to the clarification, the recovery period for QIP was 39 years. QIP generally refers to interior improvements on a nonresidential building. Taxpayers can amend their 2018 or 2019 tax returns to claim the bonus depreciation. Alternatively, taxpayers can apply for a change in method of accounting on their 2020 returns to claim the additional deduction. From a tax policy perspective, now is an opportune time for capital improvement projects to take advantage of the bonus depreciation provisions. Some considerations include the potential limitation on business interest expense. The CARES Act provided flexibility to this limitation for the 2020 tax year. Additionally, some states do not allow for 100 percent bonus depreciation.
Kris Kolluri, CEO, Cooper’s Ferry Partnership (Camden)
With the exception of the commercial warehouse market, the broader commercial real estate market is enveloped in uncertainty, which is directly attributable to the pandemic. However, one way to give the commercial market developers some confidence in New Jersey’s long-term commitment to retain and attract new businesses is to re-establish an incentive framework that is geographically equitable. In addition, commercial developments on their own are a means to an end in terms of building a sustainable and prosperous community. Underpinning the success of our established and up-and-coming communities has always been New Jersey’s enviable standing when it comes to producing strong and qualified human capital. Without human capital we cannot retain or attract new businesses and without businesses the commercial real estate market will experience a long-term decline. New Jersey must, as a matter of state policy, aggressively invest in our higher education system to ensure the production of a robust human capital pipeline.
Greg Lalevee, business manager, IUOE Local 825 (Springfield)
The top priority for Washington next year is to fully fund the Hudson River rail tunnels. Nothing is more important for New Jersey’s real estate community. We are one superstorm from losing passenger rail access to New York. We’ve lost a decade with the ARC tunnel being canceled followed by funding being held up on the new project. No doubt the Portal Bridge is important, but losing the tunnel will be devastating. One of our most important economic assets — location, location, location — will be vastly diminished. Our congressional delegation has pushed hard. We need an administration that will listen and a majority in Congress that will fully fund the Hudson tunnels. Now.
Gene Preston, partner, east region, Dermody Properties (Morristown)
President, NAIOP New Jersey
From my perspective, New Jersey lawmakers should be open to these initiatives NAIOP New Jersey is advancing on behalf of the commercial real estate industry:
- The proposed COVID-19 Economic Recovery Act incorporates many components of Grow New Jersey with adjustments to make it fiscally feasible in the COVID economy (e.g., acknowledging employees are working remotely, establishing high net benefit thresholds), removes restrictions that discriminated against middle-class suburban jobs and tweaks the commercial Economic Redevelopment & Growth program to allow the Economic Development Authority to share in excessive profits.
- While most construction continued during the emergency, not all towns were performing inspections, resulting in delays and backlogs. Legislation to allow third-party construction inspections, modeled on the very successful Licensed Site Remediation Professional program, would certify private consultants to meet the demand for project inspections.
A three-year matching grant program for nonresidential buildings would help fund upgrades to ventilation systems and other enhancements of tenant and worker safety as we continue to struggle with COVID-19 and prepare for future pandemics.