AI is going to affect every industry and commercial real estate is ripe to be impacted by this technology. Many are trying to figure out how to leverage it to make their own businesses better and more efficient. Thomas Stephenson does a great job of showing different use cases CRE AI.
Topher Stephenson is head of operations at Aspire CRE, a real estate brokerage in Houston, TX and is someone you should follow if you’re in commercial real estate and want to learn more about AI and how it’s affecting the business. Below is his one of his tweets talking about
THE NEW CHATGPT IMAGE UPDATE IS REAL
“TAKE THIS SITE PLAN AND MAKE IT PRETTY”
Countless brokers have asked me if AI can do this. The answer was “No” until today.
That’s how fast this is changing.
(Yes it got some text wrong but if you know how to use AI you’re not worried… pic.twitter.com/KWKB8GRx8j
I will also recommend you check out the recent tweets from Life Sci RE Guy. He has some excellent images he created with the use of AI.
Commercial real estate seems to be one of the slower industries when it comes to the adoption of AI, but I think this is coming full steam ahead for it.
Wells Fargo Center, Minneapolis, MN / Photo Credit: Bring Me the News
Central Business Districts continue to struggle to make a come back particularly in blue cities and states post covid. We’ve seen massive discounts in building values when sales have actually happened. Many office towers have seen 60-80% discounts from their last sales price.
According to the Minneapolis / St. Paul Business Journal, below are downtown Minneapolis’ top five largest office towers and the change in their valuations from assessment year 2024 to 2025, according to recently updated Hennepin County records.
Capella Tower, 225 S. Sixth St.: 2024 value was $147.7 million; 2025 value is $131.6 million, representing an 11% drop
IDS Center, 80 S. Eighth St.: 2024 value was $167.5 million; 2025 value is $135 million, a 19% drop
Wells Fargo Center, 90 S. Seventh St.: 2024 value was $173.6 million; 2025 value is $106.1 million, a 39% drop
U.S. Bank Plaza, 200 S. Sixth St.: 2024 value was $156.1 million; 2025 value is $111.1 million, a 29% drop
City Center, 33 S. Sixth St.: 2024 value was $139 million; 2025 value is $116.7 million, a 16% drop
Most building owners and their tax advisors miss this KILLER tax deduction. How do I know they miss it? Because they don’t call me to get these studies done. Partial Asset Disposition SHOULD be evaluated every year for every building owner whether you own commercial property or residential investment property. But that’s ONLY if you legally prefer paying LESS in INCOME TAX as well as REDUCE your recapture tax liability down the road in the event you decide to sell your building.
I just finished up one of these recently where it was $280,000 in interior improvements for an office. That seems like pretty standard stuff. Most tax professionals won’t even have this small of a project studied. It was all interior so most would just call it QIP and be done with it. (QIP is Qualified Improvement Property and gets a 15 year class life). In 2024, bonus depreciation was 60% so you could take 60% of $280,000 or $168,000 tax deduction. Awesome. The client just got a $168,000 and all it took was less than 5 minutes of his tax advisor’s time to figure that out. So it didn’t cost him much. Perhaps the tax advisor bills him $100 for his time to figure this out. Everything’s cool, right? Wrong. Wrong in a big way.
If the owner qualified for PAD – partial asset disposition – he should take PAD. (Note: there are some criteria as to if the improvement qualifies for PAD so the owner’s need to double check this with their cost seg firm and tax advisor).
In this scenario above, because the CPA was on top of his game and recalled this idea of a PAD, he reached out to discuss this particular project. We studied the improvement and did the PAD and did you know the owner ended up picking up an additional $118,000 in a deduction because he did PAD? That’s a net tax savings of about $40k after paying for the study. On top of that, since this property identified was tossed in a landfill, it gets removed from the basis of his building so when he goes to sell it, he will have less recapture tax to pay. If you don’t remove the property from your books that has been thrown away, you continue to carry something on your books that actually isn’t there any more. And you’ll end up paying more in recapture tax when you go to sell.
So in this scenario, if you don’t do PAD, not only would you be missing out on about $40k in immediate tax savings, but you’ll pay more in tax (recapture tax) when you go to sell your building.
So next time you are doing building improvement whether it’s interior or exterior and it’s over $100k, please remember to reach out and have a conversation with a cost segregation expert. These studies are not expensive. By doing them you are assuring your accounting and depreciation are being done correctly and you get some significant tax benefits both now and when you sell.
Apartment and multi-family new construction declined significantly. Jay Parsons is a leading consult in the field and always publishes great information. Here’s some very interesting stats where he shows just how slow starts have been for many cities throughout the U.S. See his LinkedIn post below.
We’ve clarified the pricing to use Green Zip Tape dry wall tape. The cost is $3/SF for the tape and we will guarantee you’ll see at least a 30% tax benefit.
Example: 40,000 SF hotel. Costs to build are $10MM. 👷 GZT Cost: $120,000 ($3/SF x 40,000 SF) – this is deductible (expense) so the net after tax cost is $75,600. 👷 We will guarantee you’ll see at least a $30/SF tax benefit at a 37% tax rate 👷 Tax Benefit is $1,200,000 guaranteed – that’s 32-33% of the cost basis accelerated but it’s quite possible the actual results go much higher. Using Green Zip Tape it would not be out of the question to see 40%+ reclassified.
GZT goes on 2x faster than regular dry wall tape. We have a special applicator gun that we will let you use. One man typically can knock out huge space. It’s lighter and easier to use. Less skilled finishers are needed saving on labor. It’s green so it helps with your sustainability initiatives and may help your pitch with city/county councils. It can help with LEED credits if you are chasing those.
When you go to sell the building, you’ll have the proof, the receipts as to how this building performs from an accelerated depreciation standpoint and it should be something that you market because the next owner will get bigger tax benefits from your building that he buys than he does from a comparable building NOT built with Green Zip Tape. There are a number of other benefits but I won’t put them all here.
This is for projects of about $10MM+ or more in new construction. Must have a big dry wall application so think multi-family, senior or college housing, hotels, hospitals and medical facilities. Non-profit might like it for the flexibility it provides with removable sheet rock panels or for the green building benefits but they can’t take advantage of the tax benefits and the tax benefits are not transferable like they are with 179D. But that might be coming…we’ll see.
Global Commercial Real Estate giant, JLL, sees improvements in the market. Here’s the CNBC interview with JLL CEO Christian Ulbrich: We’re at the beginning of recovery cycle for commercial real estate. He discusses Jones, Lange LaSalle Inc. 2024 fourth quarter financial results.
The stock is up nearly 50% in the past year so clearly there is anticipation that commercial real estate and development is coming back.
The overly burdensome Corporate Transparency Act which required every LLC to file reports with Treasury to help fight financial fraud has been put down by President Trump and Treasury Secretary, Scott Bessent. The Beneficial Ownership rules (BOI) were an unnecessary burdent for Americans. This was a crazy rule that was a massive infringement on the rights of Americans all with the hopes that they would identify financial fraud. It came across that all American business people with LLCs are suspects when it comes to hiding finances. This is good news that this has been killed.
Below is the announcement that the Treasury Department made on Twitter on March 2nd, 2025.
The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines…
Cost cutting continues to hit Washington, DC with President Trump’s Department of Government Efficiency (D.O.G.E.) works its way through the vast bureacracy that is the Federal goverment. It’s been reported for a number of weeks that many of the building that the goverment owns have been used very little over the past several years. Trump is looking to sell as many as 443 buildings. 80 million square feet might be coming up for sale.
These buildings are considered “non-core buildings” and they are across 47 states. The General Services Administration (GSA) is responsible for unloading the space. Apparently it will be posted on the GSA’s website.
This comes as reports of a rapid rise in homes for sale in the DC area as a response to the slash and burn attitude that the new adminstration is taking to cost cuts.
The office market has been brutalized in most cities and this is not going to help. At least this is spread out across 47 states but I suspect the bulk of this inventory will hit around the Washington DC metro area.
Google Data Center, Mount Holly Commerce Park – Moncks Corner, SC – Post and Courier
Data Centers are the hottest play in big time commercial real estate. Billions are at stake. South Carolina looks to be a player in the data center business and will do whatever it can to make sure we have enough electricity to power these centers.
There has been some news that Spartanburg County is about to get a $2.8 Billion investment from an unnamed company at this point. Fox Carolina has a news story about what the Spartanburg County Council is considering with this investment. I’m assuming there will be massive tax breaks provided to this company to have them invest in South Carolina.
“Councilman David Britt said the county is still in negotiations with the company, which he described as a high-performance computing center that supports engineering, technology and aerospace sectors.” Furthermore, “Britt specified the project is not a data center and would also be an energy-self-sufficient facility.”
There’s lots of information coming out of Columbia, SC lately that South Carolina wants to get in front of the data center boom and be sure that SC gets more than its fair share of data center investments. Here’s the South Carolina Data Center Map.
