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Tuesday, April 12, 2016

Investment in Solar Energy Yields Consistent Returns

By Chris Fraser (Charleston, SC)

The sun is literally shining on new investment in a particular form of renewable energy across the U.S. and especially in South Carolina.

As someone who has had a long interest in solar power development, I was encouraged to see legislation in place – at the federal and state levels – to stimulate personal and business investment in solar technology as an alternative source of energy production.  As a result of increased tax incentives in South Carolina in particular, we installed an eight-kilowatt solar system on the roof of our family home in December 2015.  Given a mild month of March, our power bill was $0! In looking closer at our actual March power usage, which would have resulted in a $200 power bill under normal conditions, this savings was effectively a 10% return on our after-tax installation cost.

Avison Young’s office in Charleston, SC also has solar panels that generate electricity to supplement power for our operations. Like my family in the case of our home, Avison Young receives ongoing energy savings, depending on the actual amount of energy generated by solar, which will offset monthly costs and the cost of installing this system over the long term. In other words, Avison Young’s solar power system in Charleston will produce consistent annual returns on investment through reduced operating expenses and other benefits.

My personal and business experiences with solar energy reached another level recently with the release of the Avison Young Topical Report  Solar in South Carolina: Great for Business

As the report explains, the business case for investing in solar power has never been stronger for businesses and property owners in South Carolina. Bottom-line benefits can start accruing after just five years of solar power use, with longer-term benefits including ongoing savings on electricity bills and a reduced reliance on more traditional forms of power generation, which contribute to global warming.

The recent extension of the federal government’s solar energy investment tax credit (ITC) to 2021 and the state’s solar energy tax credit (which provides another 25% tax credit based on the purchase and installation costs, along with a five-year depreciation schedule), have helped establish an investment environment conducive to promoting solar power as a viable alternative energy source in South Carolina.

Recent advances in solar technology and mass production are driving costs down; and, with tax credits like those in South Carolina and other incentives, solar is becoming a more cost-effective solution across the U.S.

I encourage you to investigate your state’s solar power incentive programs – for residential or business purposes – and consider this positive form of investment.

For more details, please read the Avison Young Topical Report Solar in South Carolina: Great for Business on the Avison Young website.

Monday, April 11, 2016

Implications of Rising Protectionism for the Real Estate Industry

By Amy Erixon, Toronto

Collectivism is fundamental to both the “New Economy” and the real estate industry.  Immeasurable benefits, such as reduction in global poverty by over 2 billion people over the past 40 years are credited largely to rise in global trade and urbanization.   Economies of scale made this possible. Knowledge has become far more accessible, and costs of bringing an idea to market have been greatly reduced, thanks to harnessing of the internet.  Our lives have been forever changed. 

Staggering fortunes have been made by harnessing these forces and delivering solutions to the marketplace;   and yet rather than unlocking barriers to equal opportunity-there is growing evidence and considerable consternation over rising income inequality, corporate and private tax evasion and the pace of technological and demographic change upending society as we know it.   Hence the rise in protectionist rhetoric, but this is entirely the wrong tool to address these issues in today’s world. 

According to MIT’s School of Political Science, discord in the political world is not only increasing, statistically it is increasing exponentially.  As real estate professionals this should be great cause for concern – at the local, regional, national and international levels.  Say you are a builder – you rely on local and regional publicly funded infrastructure, available skilled labor and stable building codes and tax regimes.  Say you are an owner – what if your tenants suddenly find their businesses unable to function due to supply chain disruption, costs skyrocketing due to border crossing issues, tariffs and/or extradition of meaningful swaths of the workforce (this is how the housing situation became so dire in Spain during the last recession).   Say you are an international investor - $70 billion of foreign direct investment went into the US alone last year – risks are not insignificant of these assets being impacted in an environment of escalating counterproductive policy proposals.

Our economic health and social future depends on political leaders coming together to find ways to spread costs burdens equitably and ensure benefits of technology are unfurled ethically.   The January 30, 2016 Economist article – Going after Google suggests a common sense approach to dealing with tax avoidance that speaks to the direction in which comprehensive solutions lie in an increasingly global economy.   Every country taxes its corporations and residents on their worldwide income which is then redistributed back pro-rata to the source countries, accounting for both workers and consumers in the redistribution formula.  Ideas like this highlight that cooperation, not protectionism provides better solutions, both morally and economically.  

I profoundly agree with Peter Diamandis, author of Abundance is our Future.   The question is how do we get there.   Technology is key to solving most of the causes of distress and suffering in our world - that will be the topic of future blogs.     But technology cannot deliver its promised benefits, and neither can we hope to build and invest in healthy communities without functional and constructive public policy.  

The postings on this site are those of the bloggers and do not necessarily represent the views or opinions of Avison Young.