The passage of President Donald Trump's tax and funding bill could spur a new wave of industrial development across the United States, a commercial real estate services firm said.
With Trump's July 4th signing of the "One Big Beautiful Bill Act," construction of production and manufacturing sites around the country can shift from a wait-and-see approach to shovel-ready, Avison Young said in an analysis.
The firm said the new rules will benefit developers by broadening the scope of assets eligible for tax breaks — if the sites are developed.
"We really think the biggest beneficiaries are going to be the people that have been waiting to make a decision and execute in the next half a year here," Peter Kroner, Avison Young's director of national industrial market intelligence, told CoStar News in a phone interview.
If the bill's passage prompts a wave of development, it would start as the country's industrial vacancy rate, at 7.5%, hovers at its highest level in a decade, according to CoStar Market Analytics. Impending projects are forecast to push vacancy higher, according to the report.
The bill builds on the 2017 Tax Cuts and Jobs Act that provided 100% bonus depreciation for machinery and equipment from calendar years 2018 through 2022 and then at declining percentages each year from 2023 through 2027, according to the Bipartisan Policy Center.
"Passage of the Big Beautiful Bill mirrors the effects of the 2017 TCJA expensing provisions," Kroner said in Avison Young's analysis. "The new bill builds on that framework but broadens the scope by including production and manufacturing facilities, aiming to fuel a domestic manufacturing renaissance and reshape supply chain strategies."
Kroner also said members of the real estate industry should expect new development to be concentrated in areas within six- to eight-hour drives from major industrial hubs in the Midwest and Southeast.
Limited window for action
A sense of urgency exists for companies that plan to take advantage of the incentive, Kroner said. Developers should be aware that rising material costs and prolonged lead times could challenge feasibility, placing a premium on efficient project execution and site selection, he said. The tax benefits make ownership a compelling strategy for occupiers, Kroner added.
Qualified projects must commence construction by January 2029 and be placed in service by January 2031 to be eligible, Avison Young said.
The new law also should lead to increased sales interest, another brokerage leader said.
"The people who own the property are going to be incredibly interested in this because, you can imagine, it's been a minute since a lot of them have been able to sell anything," Camille Renshaw, the CEO and cofounder of New York-based investment brokerage firm B+E, told CoStar News in a phone interview. "This should help them in terms of pricing. This should lower cap rates a little bit and get them to be able to trade some real estate they haven't been able to in a while."
Since January, more than $3.5 trillion in U.S. manufacturing investments have been announced by companies including semiconductor maker Micron Technology, which said it plans to spend billions on projects across the country.