Page 12 - RE-NJ

10 SUMMER 2024
NAIOP: RUSHING N.J. ENERGY PLAN
WOULD HARM LANDLORDS, TENANTS
Plan, which he unveiled in 2019 and has updated in recent years. The platform seeks to eliminate the use of fossil fuels in part by focusing on the building and transportation sectors, outlining aggressive goals that have drawn pushback from business groups.
In its position paper, NAIOP
New Jersey warned of the risks
of “unrealistic timelines coupled with mandates for unproven technologies,” arguing that the capital needed to accelerate building electrification “will financially strain developers and tenants.” That will put further pressure on an office sector that
is already grappling with reduced occupancy after the pandemic, the chapter said, increasing the risk of default or abandonment and leading to lower property tax revenue for municipalities.
That’s not to mention rate hikes
that utilities will levy to fund
their own infrastructure upgrades and incentives for electrification, NAIOP said. The necessary capital requirements plus landlords’
share of projected rate increases will reduce investment in new commercial building development in the state by $938 million and wages and salaries by more than $750 million per year, the position paper said, citing research by Energy Plus Solutions.
“New Jersey should assess the feasibility — determining the costs, threats, engineering demands
and upheaval — of electrifying
the commercial real estate sector before imposing a mandate for electrification,” NAIOP New Jersey wrote. “Developers and electric utility companies face significant financial and engineering hurdles to meet the 2035 deadline.”
In the interim, the chapter is also calling for greater collaboration and transparency among utility providers, exploring new methods to fund grid improvements
and improving building energy conservation inducements to make them easy to access and financially attractive to developers. It also cited the need to expand financing for technologies such as electric vehicle chargers and battery storage, in addition to pilot demonstrations of emission-reduction projects such
as hybrid heating, carbon capture, networked geothermal, microgrids, fuel cells and data sharing of recent conversions.
Kennedy said NAIOP hopes to steer the focus to newer buildings, where full electrification is more attainable. He added that many of the state’s older, obsolete office buildings are already likely to be redeveloped in the coming years, making them all but irrelevant to the discussion.
“For new buildings, obstacles to integrating clean energy can be identified and addressed during the design phase,” the chapter wrote in the position paper. “Financial incentives to incorporate clean energy technology into new buildings should include a clean energy pilot program so developer investments in clean energy can
be recouped through lower tax payments.”
The document also notes that the “overly ambitious 2035 deadline for eliminating fossil fuels jeopardizes New Jersey’s uninterrupted
access to power, eroding business confidence in the state’s ability
to supply reliable electricity.”
That looms especially large for technology-intensive industries like fintech and insurtech, which rely heavily on power-intensive artificial intelligence, as well as cold storage facilities for food, pharmaceuticals and other critical sectors.
Kennedy said NAIOP has submitted the paper as an official response to the Board of Public Utilities, which has engaged stakeholders as it looks to update the Energy Master Plan. The chapter expects to meet with other policymakers in Trenton in the coming months, he added, while the document is also meant to guide the discussion with future administrations after next year’s gubernatorial election.
“We’re very clear in this paper
that we do not support (the plan in its current form), but we’ve offered up some solutions and recommendations,” Kennedy said, adding that the commercial real estate industry “is willing to come to the table and roll up its sleeves” on the issue.
State officials must slow the timeline for commercial buildings to become fully electrified, ensuring landlords will have reliable access to power and allowing policymakers to take a harder look at the costs and other hurdles to reaching that milestone by 2035.
That’s the position of NAIOP New Jersey, one that’s now enshrined in a white paper that the commercial real estate association released
in mid-July. The organization commended Gov. Phil Murphy’s administration for seeking to address climate change, but said the mandates under his proposed Energy Master Plan will have “unintended adverse economic impacts” on an industry that contributed some $14 billion to the state’s gross domestic product in 2013.
“Energy is on the top of everyone’s mind,” NAIOP New Jersey CEO
Dan Kennedy said of the chapter’s members, specifically with respect to the “risks and opportunities” that come with the type of transition that Murphy has called for since taking office. That made it important
for the association to carve out
a formal policy position that was specific to the commercial real estate sector, he said, one that was proactive rather simply critical of the proposal.
Its recommendations include allowing commercial real estate owners to retain autonomy
over where their energy comes from until the state builds a grid sufficient to satisfy current and future demands and until new, proven and reasonably priced clean energy technologies are developed. NAIOP also argues that adjusting the timetable for converting New Jersey to 100 percent clean energy — currently 2035, as outlined by an executive order that Murphy signed last year —would achieve several goals:
• Preserving business confidence
• Allowing the state to study how full building electrification will impact the grid’s short- and long- term reliability and whether it can handle the added demand
• Determining the cost of such a conversion and who will pay for it
NAIOP cited a host of concerns about Murphy’s Energy Master
Dan Kennedy is CEO of NAIOP New Jersey
HAVE A QUESTION ABOUT REAL ESTATE NJ?
Contact Editor Josh Burd
at [email protected].