Unlocking Value in Commercial Real Estate: Navigating the One Big Beautiful Bill Act's Tax Provisions

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, reshapes the financial landscape for commercial real estate (CRE) investors. By restoring 100% bonus depreciation for qualified real estate and accelerating phase-outs of renewable energy tax credits, the legislation creates a critical strategic window for investors to reposition assets, prioritize energy-efficient upgrades, and lock in tax benefits before deadlines loom in 2027. For proactive investors, this is a chance to enhance cash flows, reduce risk, and position portfolios for long-term resilience.

The Power of 100% Bonus Depreciation

The OBBBA's restoration of 100% bonus depreciation for qualified real estate is a game-changer. Investors who acquire or construct nonresidential property—such as warehouses, industrial complexes, or multifamily buildings—used for manufacturing, production, or refining can immediately write off the full cost of the property in the tax year it is placed in service. This provision, effective for property acquired after January 20, 2025, eliminates the prior phased depreciation schedule and offers an immediate tax shield, boosting cash flow and reducing taxable income.

For example, a developer constructing a $10 million industrial park qualifies for immediate deduction of the entire $10 million, lowering taxable income by that amount in Year 1. This accelerates return on investment and makes such projects more financially viable.

The Renewable Energy Credit Cliff: Act Now or Pay Later

While the OBBBA extends tax breaks for real estate, it also tightens the screws on renewable energy incentives, creating urgency for developers of energy-efficient properties. Key changes include:
1. Accelerated Phase-Outs: Wind and solar projects must begin construction by July 2026 (12 months after the Act's enactment) to qualify for the full Investment Tax Credit (ITC) or Production Tax Credit (PTC). Projects placed in service after December 31, 2027, lose eligibility entirely.
2. Foreign Entity Restrictions: Projects involving “specified foreign entities” (SFEs) or their material assistance (e.g., foreign-made components) face disqualification from credits like the ITC and PTC if construction begins after December 31, 2025. This incentivizes reliance on domestic supply chains for renewable infrastructure.

The stakes are high: a commercial property with solar panels installed by 2027 could qualify for a 30% ITC, while a delayed project might receive nothing. Meanwhile, the termination of the Section 179D energy-efficient commercial buildings deduction (for projects starting after June 2026) adds pressure to act swiftly on green upgrades.

Strategic Opportunities for CRE Investors

1. Prioritize Renewable Projects with Tight Timelines
   Investors should fast-track renewable energy initiatives tied to commercial properties. For example, retrofitting office buildings with solar panels or installing wind turbines on industrial sites by 2026 ensures eligibility for the ITC. Proactive developers might also partner with domestic manufacturers to avoid foreign entity restrictions.

2. Leverage Bonus Depreciation for Industrial/Logistics Assets
   The logistics and industrial sectors—critical for e-commerce and manufacturing—are prime candidates for bonus depreciation. Investors acquiring warehouses or data centers can immediately deduct their full cost, making these assets more attractive in a rising interest rate environment.

3. Focus on Multifamily Properties with Energy Efficiency
   Multifamily developments upgrading to energy-efficient systems (e.g., LED lighting, HVAC) before June 2026 can still claim the expiring Section 179D deduction. Pairing these upgrades with 100% bonus depreciation amplifies tax savings, enhancing net operating income.

Risks and Considerations

• Foreign Supply Chain Dependence: Projects relying on foreign components (e.g., Chinese-made solar panels) risk losing tax credits. Investors must vet suppliers and ensure compliance with the “material assistance cost ratio” thresholds.
• Phase-Out Deadlines: Missing the July 2026 construction start deadline for renewable projects means forfeiting tax incentives. Delays could render these investments less profitable.
• Regulatory Uncertainty: While the OBBBA is law, future Congresses may tweak provisions. Investors should model scenarios where tax policies shift again.

Investment Takeaways

• Move Quickly on Renewable Projects: Secure land, permits, and supply chains to start construction by mid-2026.
• Target Bonus Depreciation-Qualified Assets: Industrial, logistics, and manufacturing-linked properties offer immediate tax benefits.
• Diversify Supply Chains: Mitigate foreign entity risks by sourcing domestic materials for green upgrades.
• Monitor Regulatory Developments: Stay informed about potential amendments to energy credit rules post-2027.

Conclusion

The OBBBA's provisions are a double-edged sword: they offer unprecedented tax advantages while introducing strict deadlines and foreign restrictions. Investors who act decisively—accelerating construction timelines, prioritizing domestic partnerships, and maximizing depreciation benefits—can transform these provisions into lasting competitive advantages. For those who wait, the window to capitalize on these incentives will slam shut in 2027, leaving behind a landscape of higher costs and reduced flexibility. The time to act is now.