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Press Release Published: Apr 30, 2024

McClain: Strong Commercial Real Estate is a Critical Part of Local Communities

WASHINGTON—House Committee on Oversight and Accountability Subcommittee on Health Care and Financial Services Chairwoman Lisa McClain (R-Mich.) today delivered opening remarks at a hearing titled “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” Chairwoman McClain discussed how the Biden Administration’s policies throughout and beyond the pandemic have harmed American businesses and put the strength of the commercial real estate market at risk.

Below are Subcommittee Chairwoman McClain’s remarks as prepared for delivery.

I recognize myself for an opening statement.

I’d like to thank our witnesses for appearing before the Subcommittee today.

We are here to examine the strength of the commercial real estate markets and talk about what Congress can do to ensure the financial health of this enormous part of our economy.

The continued health of commercial real estate industry is critical to Americans of all stripes.  Whether it’s the construction industry that builds and rehabilitates properties to the people that clean and manage to properties to the tenants – both commercial and residential – America needs a healthy commercial real estate industry.

I fear headwinds are building and could lead to serious distress and we need to hear what policy makers can do to avoid reaching the point of no return.  We cannot face another real estate crisis that requires taxpayers to bear the burden.

It is undeniable that the COVID-19 pandemic reshaped the commercial real estate market.

Throughout the pandemic, businesses large and small enacted telework policies and consumers adjusted to online retail.

These trends have not changed significantly as the world has returned to a sense of normalcy.

In 2023, the national office vacancy rate reached 19.2 percent.  

Delinquency rates rose to 6.5 percent during the final months of 2023.

This increase comes as more than $2.2 trillion in commercial debt will come due between now and the end of 2027.  And refinancing this debt comes as interest rates have jumped due to the Biden Administration’s inflationary crisis.

The Democrats’ spending spree has driven rampant inflation and forced the Federal Reserve to take significant action to tame rampant inflation.

Sadly, the Federal Reserve’s interest rate increases are not the only concern the federal government is causing in commercial real estate markets.

The Department of Housing and Urban Development has continued to decrease the number of loans it has made to support the commercial housing market.

At the Department of Transportation, developers have reported that it takes a year or longer after a loan is approved to receive a disbursement on a qualifying commercial real estate asset.  This delay is unacceptable.

Across the federal government, agencies are allowing staff to work from home despite decreased productivity, failures to adequately regulate important sectors of our economy, and calls from Congress.

Even Mayor Bowser has told President Biden that his Administration’s telework policies are killing Washington, D.C.’s local businesses.

The Biden Administration has offered vague information and statistics to support their claim that post-pandemic telework had been successful.

It took four months and the threat of a subpoena for federal agencies to produce to the Committee basic information about their use of telework.

I’m from the private sector.  When you don’t show up to work, you lose your job. 

For too long, the Biden Administration has allowed federal employees to skirt by on lax telework policies.

The Commercial real estate market cannot flourish if its offices are empty.

The American people can’t flourish when federal officials refuse to show up to work and do their jobs delaying new treatment approvals, halting new infrastructure projects, and enabling waste, fraud, and abuse.

Congress and the Federal Government must do more to get out of the way of industry leaders and eliminate burdensome regulations and red tape.

Despite these troubling headwinds, there are signs that the health of the commercial real estate market is strong.

Neighborhood retail properties continue to perform well. 

Local shopping centers and other brick-and-mortar operators continue to perform well and have experienced positive rent growth.

Industrial real estate has also been a bright spot, with analysts predicting moderate rent growth over the next 10 years.

Multifamily properties continue to hold strong with vacancy rates remaining stable. 

It is vital we bring federal employees back into the office and ensure our commercial real estate market remains strong.

I am looking forward to having this very important discussion with you all.

With that I yield to Ranking Member Porter for her opening statement..