The One Big Beautiful Bill: Catalyst or Constraint for CRE’s Next Cycle?

February 3, 2026

Policy Featured Finance Investment More National

Industry leaders assess how the law is shaping projects, pricing and capital decisions in today’s market.

(From left to right) David Cohen and Danny Diaz Leyva. *Images courtesy of Cohen Property Law Group and Day Pitney, respectively*

The passage of the One Big Beautiful Bill arrived at a moment when the commercial real estate industry was still trying to regain its footing after two years of stalled projects, uneven deal flow and prolonged uncertainty. Almost seven months later, the question is no longer what the legislation was designed to do, but whether it has meaningfully altered behavior on the ground.

The bill’s mix of tax incentives—from expanded depreciation benefits to renewed support for Opportunity Zones and manufacturing investment—was intended to act as a catalyst, freeing up capital, improving cash flow and encouraging developers, lenders and investors to reengage with projects that had been sidelined. In practice, its impact has been more nuanced.

While the tax framework is clearer, the broader operating environment remains unsettled. Tariffs continue to pressure construction costs, political volatility is still elevated and concerns about the federal deficit are increasingly filtering into credit markets.

Policy clarity is fuel for deals. Once the rules stop moving, capital starts moving.
—David Frosh, CEO, Fidelity Bancorp Funding

As a result, the industry has entered a new cycle defined by measured momentum rather than outright acceleration—a duality reflected across experts who view the bill as a potential tailwind, but not a cure-all. For some market participants, that clarity alone has mattered.

“The passage of the so-called Big Beautiful Bill removed an uncertainty regarding tax law,” Gregg Abella, CEO at Investment Partners Asset Management, told Commercial Property Executive. “So, on the one hand—by providing clarity as to how the income from various types of investments will be taxed—passage of the bill has helped investors feel confident in putting money to work in markets broadly.”

That confidence, however, is tempered by longer-term considerations. Some experts point out that reduced federal tax revenue could deepen the deficit over time, potentially exerting upward pressure on interest rates, a scenario that would ripple through both consumer and commercial borrowing.

Others characterize the legislation as simultaneously stabilizing and fragile. Danny Diaz Leyva, partner at law firm Day Pitney, views the bill as leaning toward stimulus, injecting capital into a market that had been operating below capacity. Lenders, meanwhile, are seeing improved sentiment without full conviction. David Frosh, CEO of Fidelity Bancorp Funding, sees rising optimism among sponsors, even as tariff and rate pressures continue to influence underwriting and timing.

“Confidence is up, certainty isn’t and lenders price that gap,” Frosh said. “Confidence is better, but fragile. Tariffs, inflation and rate risk still cloud the runway. Lenders are cautious, often pushing closings into next quarter. Optimism exists, but it’s still conditional. Stability hasn’t fully landed yet.”

The bill’s early impact suggests that the next phase of the commercial real estate cycle will be shaped not only by policy incentives, but by how effectively market participants navigate lingering volatility, using clarity where it exists, and caution where it doesn’t.

Tax policy is starting to move the market

Seven months after the One Big Beautiful Bill took effect, its impact is beginning to show up in project feasibility, underwriting assumptions and the timing of capital deployment. While longer-term outcomes remain tied to broader economic conditions, several provisions are already influencing how developers, lenders and investors are approaching deals this year.

Rob Haggerty, tax partner at Armanino, which advises construction firms on navigating the new framework, groups the provisions into three buckets: new, permanent or extended, and hybrid or technical tweaks.

“One new provision is a new classification of depreciable property called Qualified Production Property, which allows 100 percent expensing of qualified nonresidential real property used in production, manufacturing and refining,” he said. “The permanent or extended provisions are very beneficial, but they aren’t as fun since they simply made a Tax Cuts and Jobs Act provision permanent before it expired and was truly felt by taxpayers.”

Other elements of the bill restored or extended incentives that many developers had expected to lose. Haggerty pointed to the Qualified Business Income Deduction and 100 percent Bonus Depreciation as especially impactful, noting that permanence provides the predictability required for multi-year planning. Adjustments to the section 163(j) business interest limitation, along with Opportunity Zones and Qualified Small Business Stock exclusions, are also expanding flexibility around capital structuring and exit strategies.

With full expensing reinstated, Frosh noted that projects are moving faster through underwriting and into execution. Bonus depreciation and accelerated cost-recovery provisions under the One Big Beautiful Bill have helped revive investor interest across CRE, showing up in increased acquisition and refinancing activity. While many transactions remain in early stages, Frosh characterizes the shift as meaningful after an extended slowdown.

(From left to right) David Frosh and Rob Haggerty. *Images courtesy of Fidelity Bancorp Funding and Armanino, respectively*

“There’s a clear resurgence in activity and optimism,” he said. “Even though some deals are still in preliminary stages, the mindset has shifted decisively from defensive to opportunistic. The feeling among clients is that ‘business as usual’ might finally be on the horizon after an extended deal-making drought. Policy clarity is fuel for deals. Once the rules stop moving, capital starts moving.”

Among the bill’s provisions, Opportunity Zones may deliver some of the fastest and most visible responses. David Cohen, co-founder of Qualified Opportunity Zone Fund I and chairman at Cohen Property Law Group, believes the program’s permanence will act as a meaningful stimulus for development, though he cautions that rural designations still demand careful underwriting.

Diaz Leyva similarly expects accelerated depreciation, bonus expensing and expanded Opportunity Zone incentives to generate early momentum—particularly for adaptive reuse, multifamily and mixed-use projects, including developments repositioned as creative office environments.

Where policy gains run into economic reality

Even as tax incentives begin to revive deal flow and improve near-term project economics, the broader economic backdrop remains challenging. Many of the structural pressures that have shaped real estate decision-making over the past two years continue to outweigh the influence of any single tax measure.

“While the bill may boost transactional volume, it doesn’t change the core financing calculus behind new development,” Frosh said. “High construction costs, tightening credit spreads and elevated interest rates still govern feasibility far more than tax perks.”

As a result, much of the current enthusiasm is tied to timing and structuring around tax advantages rather than to full-scale expansion. Frosh noted that until borrowing costs ease meaningfully, the bill’s impact is likely to remain more cosmetic than structural.

That tension is increasingly visible in market behavior. While inquiries and early-stage underwriting activity have picked up, developers remain constrained by compressed cap rates and persistent cost inflation. Many are proceeding cautiously, mindful that margins can erode quickly in a high-rate environment where the spread between borrowing costs and exit cap rates remains thin.

Macroeconomic volatility adds another layer of risk. Frosh warned that tariff shifts and policy changes can quickly erode gains created by accelerated depreciation or expensing provisions.

“A tax win may not stand a chance against a steel price surge… Incentives help, but they can’t fight economics. Policy wins don’t build buildings—permits, parts and pricing do,” he said.

Concerns also extend beyond construction inputs to the broader credit landscape.

“The U.S. national debt is currently at nearly $38 trillion and climbing, which is approximately 124 percent of our GDP,” Abella said. “We’ll see how this plays out, but the early math seems to suggest that further deterioration of the U.S. balance sheet will continue. To the degree that the government needs to keep printing money to pave over the deficits, it could have an effect on the dollar, inflation, interest rates and the cost of capital.”

While credit spreads remain unusually tight, Abella believes early signs of stress are beginning to surface, an expected development at this stage of the cycle. A handful of high-profile defaults, he noted, could prompt investors to reassess valuations and risk, reinforcing caution even as deal activity improves.

Uneven tailwinds shape the next phase

While the One Big Beautiful Bill was designed to re-energize investment across commercial real estate, its effects are playing out unevenly. Developers, landlords, service providers and investors are benefiting in different ways—and on different timelines—depending on their capital structures, asset strategies and geographic exposure.

From a tax perspective, the most immediate impact has been on cash flow. Haggerty noted that the tax cuts embedded in the One Big Beautiful Bill have already increased after-tax cash flow for many taxpayers, a dynamic that could spur development in the near term. At the same time, retroactive bonus depreciation and eased interest deductibility are prompting some owners to revisit projects that had previously been shelved.

Additional momentum could come from guidance around new Opportunity Zones, particularly for industrial and manufacturing-oriented assets. Still, enhanced incentives alone are not enough to overcome fundamental constraints. As Frosh cautioned, “tax policy sweetens deals; it doesn’t de-risk them.” Projects with strong fundamentals may move faster, but elevated debt costs and construction inflation continue to dictate feasibility. Optimism is returning, he said, but “optimism won’t close deals—only cash flow will.”

Looking ahead, the durability of the recovery will depend largely on interest rates.

“If rates stay steady, we’ve got real runway,” said Frosh. “Liquidity’s back, confidence is building and deal pipelines are growing. This feels like a true restart, not a quick flash. Investors are breathing again after two years underwater. The market finally has oxygen.”

For now, caution remains part of the equation. Investors are proceeding carefully, even as they take note of the opportunities emerging across the landscape, Cohen observed, underscoring a market that is reawakening, but still moving with discipline.