How will the new
infrastructure bill impact
CRE? 

[00:00:21] Brian Oakley: Hi, my name is Bryan Oakley. I'm an executive vice president in the public institutions group within JLL. I work in the energy infrastructure practice and a lot of what we do is advising the government, in infrastructure programs. and specifically in lending or providing discretionary grants to eligible projects, around the country.

[00:00:50] Henry D’Esposito: my name's Henry Desperado and I lead construction research in the Americas for JLL. Looking at kind of construction costs, where they're going to go and what's impacting materials, labor, all the inputs to construction

And then also trying to work out benchmarks and expectations for what things should cost to build.

[00:01:07] James Cook: I have gathered you both here because you're my infrastructure experts. I read the news. So I am aware that there, as of this recording is an infrastructure bill that seems to have bipartisan agreement. I understand is a lot of money. Henry, what's in the bill and where's it.

[00:01:26] Henry D’Esposito: we'll kind of start from the very beginning of this, which was, a while back Biden and the Biden administration proposed a, roughly $2.3 trillion American jobs plan. So that was the first pass at this idea of a huge kind of comprehensive infrastructure bill. It has been sensed negotiated back and forth and back and forth.

We're at a place now where the newest agreement is based on something called the bipartisan infrastructure framework. And that was an agreement between president Biden and a group of roughly 20 Republican democratic senators. It's a much smaller bill now it's, you know, 550 billion or so rather than the 2.7 trillion, but a lot of Well, you'd consider kind of core or traditional infrastructure spending is still in the bill compared to the original. It's just, there were a number of other areas around sustainability in-home care for the elderly and healthcare money, R and D spending manufacturing. Has been stripped out.

And so we're left with a much smaller bill, but it's still significantly larger than any infrastructure spending in recent decades

[00:02:29] Henry D’Esposito: So how does it break out? You said roads and bridges. That's what I think of as infrastructure , but it's more than that.

[00:02:37] Henry D’Esposito there's a, roughly 110 billion in there for roads, highways and bridges. There's, there's a significant amount of money for public transit in there as well. for airports, ports for,non transportation infrastructure as well. So there's water, broadband power. All that's included in this bill too.

there's also some money towards. Newer priorities, particularly from the byte administration, including electrical electric vehicles and infrastructure and support for that. And then some for transportation safety and then a little bit of money. There's a billion dollars left for something called reconnecting communities, which is kind of focusing on urban areas that have been impacted by a highway projects in, you know, 50, 60 years ago when the interstate highway we're built working to put them, those communities kind of back together that were, that were split apart.

[00:03:24] James Cook: Brian, now what gets here? What gets you excited about this?

[00:03:28] Brian Oakley:: I'm an infrastructure nerd, so it's all exciting, but, the energy sign is going to be fascinating. So if you think of, just Evie, Evie charging, and then, vehicle to grid, I mean, there's, there's this whole. Sort of, area of development now for fleets, when they plug in, they be, they can actually become a resource to the grid.

So, you know, stuff like that. I mean, it just, it's moving so quickly. In the absence of real incentives that the F this bill will kind of turbocharge that, you know what I mean? And, and, and we're, we're moving to a much greener economy, regardless, you know, it's, it's happening. It's, what's interesting about electricity and electrons.

it flows, right. It doesn't, it's not like, like, heavy rail where, you know, you've got this fixed. Thing in the ground. So I see the energy sector as being highly dynamic, and I think we're going to see some really interesting things, as it relates to, electronic vehicle charging and then, you know, powering the grid and being a source of supply for the grid.

[00:04:33] James Cook: how does this impact commercial real estate

 it seems very targeted and very deliberate in the areas that they want to influence. and so I kind of look at it as, It builds that will we'll do a great job at advancing infrastructure priorities.

[00:04:47] Brian Oakley:: Number one, and number two, kind of sustaining jobs. And I just remember from the recovery act when we were looking for shovel-ready projects, right. And I remember we had one that just literally had been in developed for years , and we worked on it. and it was sort of a transformational project.

It was the port of Miami tunnel actually. but you know, if you were to start like, Bill passes in August. You start in September. It's going to be up three years before any large scale infrastructure project is ready to at least contemplate funding and financing in a, in a real way, two to three years, I guess, depending on size.

so I kind of look at it as like it will address infrastructure needs. I just think from my personally my expectations, it's going to take a little while, for VR for good reasons. and, and where we see new programs like new grant programs, you know, just standing up those programs it takes months, you know,and their discretionary grant programs.

[00:05:39] Brian Oakley: So it, it means, you know, there's a whole evaluation process that will have to happen. So for communities, I think there's some real opportunities to secure funding for priority projects. And I think it's going to be largely, you know, the public sector sponsors. what that means for the built environment is obviously, you know, enhanced connectivity.

, I thought there was some energy efficiency. components and that can affect the, the built environment very quickly.

[00:06:05] James Cook: So Henry, if this thing passes watt of want more construction going on isn't construction already, more expensive than it used.

[00:06:14] Henry D’Esposito: It is. Yep. And it's been going up and this kind of goes back to the comparison between this and the recovery act, because back in 2000, you know, 9, 10, 11 construction costs were, they were down, they were lower than they had been pre recession. And then the recovery act helped to bring things back. Now, we're already in a place where we've surpassed the pre pandemic pre-recession peak demands higher as everyone's seen in the news, you know, material prices, lumber steel have already gone through the roof and they've come back down a bit, but we're definitely entering an inflationary environment and adding in hundreds of billions of dollars of new demand for.

construction work. Isn't going to help that at all. And just to kind of give a sense of perspective here. So typically in an average year, or, you know, taking 2020 as an example, there was around $1.4 trillion in total U S construction spending. That's public, private, everything together. So that's a big number, but when you're comparing that to 500 billion, even if it's spread out over 6, 7, 8 years, It's a material increase, right? Whether it's 5% or 6% or something of new construction demand every year, and that's enough to have an input impact on labor costs and on materials.

[00:07:20] James Cook: Do you have a sense of, uh, the bill as it stands now? Do they think it's going to.

[00:07:26] Henry D’Esposito: It's a tough call to make, based on what I've seen, it seems like there's enough senators, Congress, people, who support it to move it forward. They've the fact that they've come so far and have announced as detailed as a public of a public plan is Brian's talking about, you know, bodes.

Well, in fact, all that language is yeah. So again at the end of the day, who knows, but it seems like the odds are much higher now than they have been at any time,

[00:07:48] James Cook: well guys, thank you so much for joining me today. this has been a fascinating conversation. I really appreciate.

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 This episode of building places was produced by Stephanie Kilgore. Our theme music was written and performed by Joel.