It’s been a little over a year since President Joe Biden signed the bipartisan Infrastructure Investment and Jobs Act (IIJA), which—despite its $1.2 trillion price tag—was roundly applauded by trade groups within the CRE industry. The legislation is both ambitious and necessary, as the U.S. lags well behind its economic competitors in infrastructure spending, ranking 15th out of 17 economies that have cumulatively produced at least $10 trillion in output from 2007-2020, according to a 2021 Cushman & Wakefield report.
With the passage of IIJA, the U.S. is finally taking steps to make up for decades of under-investment. Included in the spending is $326 billion to rebuild roads, bridges, and major projects; $66 billion to upgrade and maintain passenger and freight rail systems; $55 billion for clean drinking water, including lead pipe replacement and addressing contamination issues with lead and other chemicals; $25 billion for airports and FAA facilities; and $17 billion for ports and waterways.
But the wheels of progress turn slowly, especially considering the enormity of what IIJA is intended to accomplish. “This is a can that has been kicked down the road for decades, so it won’t be a quick flip of the switch or happen overnight,” says Landon Williams, SIOR, senior vice president with Cushman & Wakefield’s Memphis, Tenn. office. “I anticipate that it will be another 10 years before we feel the full impact, but it’s going to be worth it.”
SIORS WEIGH IN ON THEIR MARKETS
Because much of the money has only begun to trickle out as the government determines which projects will be funded via competitive grants, we asked a handful of SIORs from across the U.S. where they would like to see the IIJA money spent in ways that will most positively impact their specific regions and the nation.
Bryce Custer, SIOR, broker, NAI Spring, Canton, Ohio
Improving the waterways is much like improving the highways, and the funding makes it more feasible and economical to bring that barge traffic to the region.
Custer, whose primary focus has been on industrial development along the Ohio River (Ohio, Kentucky, West Virginia, and Pennsylvania), is enthused about the $2.5 billion investment being made by the IIJA for construction and modernization of the inland waterways—a vital component of the multi-modal freight network, with nearly 830 million tons of cargo moved annually. NAI Spring is currently working with ports and terminals on the Ohio River, and at press time the IIJA had already approved a combined $1,140,750 for two projects that will upgrade the locks and dams of Montgomery and Emsworth, Pa. along that route.
“Improving the waterways is much like improving the highways, and the funding makes it more feasible and economical to bring that barge traffic to the region,” says Custer, who emphasizes that one barge tow (15 barges) can transport the equivalent of 208 rail cars or 1,050 tractor trailers. Although a somewhat slower transportation mode, barge is also a “green” alternative to moving product by truck, which is consistent with the commitment to climate action in the legislation.
Working in conjunction with an improved rail system, which has received significant funding from IIJA, Custer believes the improved waterways will provide a considerable benefit to not only supply chain logistics, but also manufacturing along the river. “You have these old steel mills that have been torn down, and the infrastructure remains. So what we’re seeing in our area is new manufacturing and re-shoring, but there’s also been an expansion of existing manufacturing,” he says.
Custer is also encouraged by the $8 billion investment for the development of what was originally four Regional Clean Hydrogen Hubs in different regions of the country, but will now be expanded to six to 10. “I really believe that hydrogen fuel cells are our future, and you’re starting to see more truck fleets looking at fuel cells instead of batteries,” he says. “And fortunately for my market, the Ohio River is going to play a vital role in hydrogen hubs and production. We’re working with a few companies already.”
Gerard Fennelly, SIOR, president, NAI Fennelly, Hamilton, N.J.
“The number one issue on my mind today is water,” says Fennelly. “The lead pipe issue is a problem throughout the entire country, especially in areas along the East Coast where the pipes were put in over 100 years ago, and then there are the PFAS (forever chemicals) in the water supply that need to be addressed.”
The IIJA has appropriated $55 billion for the EPA to improve drinking water and wastewater infrastructure—the single largest federal investment in water in U.S. history. Funding includes $15 billion to remove and replace lead service lines around the country, with an additional $11.7 billion to be spent on drinking water infrastructure. New Jersey alone is expected to receive $1 billion over five years to improve water infrastructure. The significant expansion of funding is expected to spur water projects across the nation and result in flow-down opportunities for private sector vendors, suppliers, contractors and investors.
The number one issue on my mind today is water.
There is also another water-related issue—flooding—that the IIJA addresses, says Fennelly. “A lot of what I see happening with this legislation is the preservation of what we already have, with regards to flooding issues in areas like Paterson and Trenton, N.J. I think we’re sort of under attack by rising water levels, which is a huge problem throughout the entire country.” The IIJA provides $47 billion in funds for a variety of resilience and climate-related programs to address flood mitigation, waste management, drought and wildfire mitigation, and coastal resiliency, ecosystem restoration, heat stress, and weatherization.
The Act will also directly benefit the CRE industry with projects both large and small. In his research, Fennelly discovered that a number of non-profits in New Jersey will be receiving grants in the $500,000 to $1 million range, much of which will be invested in buying and renovating facilities, presenting opportunities for CRE professionals from architects to brokers. He also believes that the Hudson Tunnel project, which will build a new railway tunnel between New York City and New Jersey as well as reconstruct an existing tunnel, will be transformational. The project is bolstered by additional funding in the infrastructure law, which also provides funds for Amtrak, owner and operator of 80% of the mainline Northeast Corridor from Washington, D.C. to Boston. “I think it will help our economy tremendously in New Jersey—not just the jobs that will be initially created for construction workers and engineers, but the number of businesses that will be attracted to the region when the tunnel is complete.”
John Colglazier, SIOR, partner, NAI Partners in San Antonio
The number one priority of projects being proposed for the IIJA should be to ensure the life safety of the populace through investing in bridge and road safety, says Colglazier, including evacuation routes that would be needed in the event of natural disasters, which have hit Texas particularly hard in recent years.
Because of the level of importance of rail in today’s logistics world, it’s going to be interesting to see how the IIJA money is going to be distributed, and where the focus will be.
Additionally, with much of the funding for rail projects still not allocated, (the Federal Railroad Administration issued a Notice of Funding Opportunity in the fall of 2022), he is eager to see which projects will be prioritized. “Because of the level of importance of rail in today’s logistics world, it’s going to be interesting to see how the IIJA money is going to be distributed, and where the focus will be. Is it going to be the ongoing maintenance and upgrades of track, or is it going to increase the number of intermodal rail parks?”
Colglazier would favor an emphasis on commuter rail within the state of Texas, a network that would connect the cities within the Texas Triangle—Dallas, Fort Worth, Austin, San Antonio, and Houston (five of the 13 most populated cities in the U.S.)—which makes up the 15th largest economy in the world. He’d also like to see intermodal parks given the same level of prioritization as the highways and airports, because rail is such a key element to any long-term logistics planning.
Seeing funds allocated to expand the Port of Houston, the Gulf’s largest port operating at full capacity, as well as an expansion of the Corpus Christi port to serve as a pressure relief valve to Houston, would be another welcome sight to Colglazier. “It (Houston) really is the seaport for the southern part of the country, and both of those ports have significant connectivity to the rail system.”
EFFICIENCY, OVERSIGHT CONCERNS
When you’re talking about something that will be so impactful for our country, especially something that’s been neglected for so long, my biggest concern is that it’s done efficiently.
Colglazier and the other SIORs all emphasized the importance of having the IIJA funding go to the most critical areas of need and not to “pork barrel” projects. Ideally, Colglazier suggested, decision-makers would develop something akin to a “heat map” that would identify the projects that would do the greatest good for the most people, prioritizing “must do” projects over “nice to have” projects.
“When you’re talking about something that will be so impactful for our country, especially something that’s been neglected for so long, my biggest concern is that it’s done efficiently,” says Williams. “The government is a steward of the taxpayer dollars, and I want to see that the funds are spent as wisely as possible.”
This article was sponsored by the SIOR Foundation - Promoting and sponsoring initiatives that educate, enhance, and expand the commercial real estate community. The SIOR Foundation is a 501(c)(3) not-forprofit organization. All contributions are tax deductible to the extent of the law.
CONTRIBUTING MEMBERS
John Colglazier, SIOR
Bryce Custer, SIOR
Gerard Fennelly, SIOR
Landon Williams, SIOR