A trio of federal spending plans passed in the last two years dedicated nearly a trillion dollars to an ambitious expansion of green infrastructure in the U.S. But the successful deployment of those funds relies in part on commercial real estate’s ability to track down the talent to imagine and execute strategies in fields with little in the way of precedent.
Developers, brokerages and construction firms are eager to hire people in eco-focused fields who can help them secure and spend federal money, and to tap into changing sentiments around both green upgrades and how commercial spaces are used. But, the talent pool is shallow and competition is fierce.
“This is a really hot market right now, and sustainability in general is a really hot market now,” said JLL Managing Director Josephine Tucker, who leads the firm’s clean energy and infrastructure advisory practice. “We’ve probably doubled the size of our team in the last year, and are continuing to hire into this space. It’s been incredibly competitive.”
Nearly a trillion dollars of federal investment in green infrastructure, like EV charging, is creating a rush for specialized talent.
The combination of the American Rescue Plan, the Infrastructure Investment and Jobs Act and the Inflation Reduction Act will pump hundreds of billions of dollars into new projects and building retrofits, and spur land sales, touching numerous corners of commercial real estate. The ACEC Research Institute predicts the $1.2T Infrastructure Investment and Jobs Act will add $132B in economic output over the next five years in the engineering and design services sector alone.
Many developers and large brokerages, such as CBRE and JLL, see opportunities in providing assistance, financing help and project management, especially as these incentives pull demand forward and create a rush to find sites and begin construction. Existing clients want to know where they can put solar and EV charging on their property and how to tap into emerging business models to create new revenue streams. Tucker said the talent demand is growing “exponentially.”
“Rather than thinking about how to renovate an office, or how to build an office or lease that space, [real estate] really needs to be thinking, ‘how can we take advantage of what’s coming through over the next five to 10 years in these bills?’” RSM Construction and Real Estate Senior Analyst Nick Grandy said. “Because I think there’s a lot of opportunity for them to be able to change or have a foundational impact on the future of America’s real estate.”
Chasing market share in this space is strategic at a time when other sectors of commercial real estate are struggling. However, it places firms like JLL in competition with an array of experienced players, including accounting firms, consultancies such as McKinsey, and an array of architecture, engineering and construction firms.
“There’s going to be a job-creation side of this bill that we don’t think is really gonna hit until the end of the year,” Grandy said in reference to the infrastructure and jobs bill. “We’re seeing these firms looking to build up their teams right now.”
JLL’s Tucker sees increased activity in the niche sustainability space, with major projects moving forward, despite slowdowns in other sectors. And broadly speaking, she’s seeing the firm’s business focus more on asset classes like transit-oriented development or research parks, which require larger planning expertise around transportation, energy-efficiency and overall sustainability.
“CBRE is really trying to be a one-stop, full-service,” CBRE Managing Director Robert Shaw said. CBRE’s November 2021 acquisition of a majority stake in Turner & Townsend, a global consultancy with expertise in renewable power and infrastructure projects, exemplifies that strategy, he said.
CBRE and its competitors are acquiring and hiring talent to provide the full array of services needed for green infrastructure developments: traditional site selection and brokerage talent to find and acquire land, as well as project management and investment management.
New renewable projects will require traditional skills, like finding and acquiring proper sites.
This infusion of spending includes upgrades and expansion of large infrastructure projects, such as transit, airports and ports, as well as land acquisition for new asset classes, such as staging areas for offshore wind assembly, or retail strips adjacent to highway EV charging sites. Additionally, the Inflation Reduction Act includes bonus incentives for location projects in what are being defined as environmental justice communities and energy communities.
“The incentives are definitely structured with a clear incentive for tribal communities, energy communities and low-income communities,” Arup analyst Olivia Schuster said. “It just all comes down to whether or not the business, the commercial real estate developer, is going to want to build in those communities in the first place.”
One of the most important aspects of these laws, when it comes to CRE spending, development and planning, is certainty. Extended tax credits for renewable energy and new tax credits for EV charging simplify financing and make more projects pencil out.
“This is going to be hugely important in bringing down the investment return required to do a charging project,” CBRE’s Shaw said. “It’s been very difficult to underwrite charging over the last little while because you have to assume a big utilization number of those chargers to make it worthwhile. Now your utilization assumptions can go down as well.”
This kind of certainty, as well as funding and incentives for retrofits, will strengthen the case for other commercial real estate investments, including building energy-efficiency and adding renewable capacity to warehouses and larger retail buildings. Honeywell Vice President Manish Sharma, who runs the firm’s Sustainable Building Technologies team, sees the relative sluggishness of the current economy bolstering the case for more energy-efficiency investment right now, to cut operating expenses and use less energy and less carbon.
The push for retrofits also aids property managers in complying with new state and city regulations, including California’s stringent new rules around warehouses, building emissions reductions rules such as New York City’s Local Law 97, and the Securities and Exchange Commission’s proposed climate risk disclosure.
Understanding how states disperse these federal benefits will also be an important challenge for developers, as will stipulations in the IRA for prevailing wage requirements, which will significantly impact project costs, especially in areas without strong union workforces.
Knowledge of the grid, utilities and electrification will be key to all manner of upcoming projects.
So many of these shifts will require adding workers with the experience and understanding of electrification, including working with utilities, and the engineering and building challenges as well as methods and means of financing. Part of the challenge around finding talent now is the relative shallowness of the talent pool; it’s rare to find someone with more than 15 years of experience in green infrastructure or renewables due to the relative newness of this field.
CBRE’s Shaw said that the solar industry, which has seen rapid growth in recent years while also navigating the challenges and opportunities of federal incentives and policy shifts, has matured, creating a pool of experienced workers seeking a new challenge. Many are attracted to EV charging, seeing the sector currently hitting a major inflection point, and in need of experienced hands to help rapidly scale. Those with full project development experience will be in highest demand, he added.
Financing experts who can assemble deals and understand tax credits and incentives will also be in high demand, Shaw said, since “when everyone starts talking about tax equity, a lot of people’s eyes glaze over.” For EV charging, the financing will be especially key; while the federal government’s $7.5B investment toward its goal of 500,000 charge points sounds substantial, Shaw estimates the total cost of building out the charging infrastructure and upgrading the power grid might run $80B or more.
It’s especially important to find financing talent due to current economic crosswinds, JLL’s Tucker said. While exceptional levels of infrastructure spending will come from public investments, the high rate environment is slowing overall investment.
Tucker said that overall, roughly 80% of the hires her team is making are external, though existing financing talent, such as members of the capital markets group, can make the transition to work on these clean energy and infrastructure projects.
Talent may be a defining feature in how fast and how effective these federal infrastructure investments ultimately are. ACEC research found that for every new engineering and design service hire between 2019 and 2022, there were 1.6 job openings, and a recent survey of engineering firms found that 51% of those surveyed had to turn down work due to workforce shortages. Grandy said in November, there were nearly 400,000 open construction jobs.
The entire talent pipeline needs to be expanded and sped up to meet this new demand. And with the substantial federal investment potentially leading to a sea change in how the business operates, it’s key to learn how to play the game now.
“It’s like basketball when Steph Curry came into the NBA, everybody started shooting threes,” Grandy said. “That’s how the game has evolved. We’re kind of at the brink of a CRE revolution.”
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