Brace for Impact: 5 Ways U.S. Tariffs Could Shake Up Commercial Real Estate in 2025
Tariffs will play a role in shaping our industry here's how...
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If you're in the real estate market in the United States you have heard the Trump Administration announced on Friday (1/31/25) tariffs on foreign imports into the United States from Mexico (25%), Canada (25%), and China (10%). They are also considering the implementation of tariffs against the European Union (EU). These tariffs have significant economic implications for the real estate and development industry.
As of Monday night, Feb 3rd, Trump has put the tariffs on-hold for 1 month both with Mexico and Canada.
Regardless Trump has now introduced the concept that he will use tariffs to do two things, 1) Raise revenue and 2) Protect/Re-shore American jobs. This is a major US government policy shift that will reverberate through the real estate markets. Let's dig in.
Tariffs might have been in the realm of wonky economic professors until this past week, but here we are. I’ve been saying to business friends this week, the “tariffs” section in our macroeconomics books were only “lightly” touched upon as they have not played a significant role United States economics for many years.
Here’s a little history lesson on the past times tariff’s were part of the discussion:
2018 China-US Tariffs - Section 232 Tariffs on steel and aluminum. Section 301 Tariffs tariffs on tech, machinery, and consumer goods.
2002 Bush Administration Steel Tariffs - Put in place to protect domestic steel manufacturers. WTO ruled against the tariffs and the US removed them in late 2003.
1930 Smoot-Hawley Tariff Act (Great Depression) - Raised duties on over 20,000 imported goods. It tried to protect farmers and manufacturers, but led to retaliation and a worsening of the Great Depression.
McKinley Tariffs (1890) and Dingley Tariffs (1897) - Imposed high duties on imports to protect American manufacturers.
The impact of tariffs on real estate:
Higher Construction Costs (Negative for developers) - Tariffs on imported steel, aluminum, and lumber will increase costs for development.
Supply Chain Disruptions (Negative for developers) - Tariffs on imported equipment, fixtures, and appliances could delay projects and increase costs.
Impact on Industrial & Warehouse Property (Positive for developers/investors) - Tariffs could increase demand for domestic manufacturing and there could be higher demand for industrial space like factories, logistics hubs, and warehouses. However, if the introduction of tariffs disrupts global trade, this could result in a supply shock and delay industrial expansion due to uncertainty and risk.
Higher Rents & Inflation (Negative for tenants + positive for owners) - If newly introduced tariffs lead to inflation, this could increase costs for companies, which may get passed on to their customers. Inflation is already an issue, hopefully tariffs don’t make things worse, or the Federal Government reduces taxes.
Shift in Commercial Real Estate Demand (Positive for developers) - If tariffs boost domestic manufacturing, we could see property values in cities and regions with strong industrial bases significantly increase. This of course would be a reversal of a long term trend.
Potential Government Spending on Infrastructure (Positive for infrastructure REIT’s, developers, general contractors, and engineers) - more domestic production could lead to more government and private infrastructure investment for utilities (power) and logistics (roads, ports, etc).
Conclusion: Winners & Losers
Winners
✔ Industrial real estate (factories, warehouses, and logistics hubs in reshoring-friendly markets).
✔ Real estate in manufacturing-heavy regions (Midwest, Southeast, Texas).
✔ Developers tied to infrastructure spending (road, rail, and energy projects).
Losers
✖ Multifamily and commercial developers (higher costs from tariffs on steel, aluminum, lumber, appliances).
✖ Retail landlords and shopping centers (tenants face higher costs, consumers spend less).
✖ Coastal real estate markets tied to global trade (New York, LA, Miami).
2025 is shaping up to be an exciting year to be an investor. Don’t blink or you might miss a Tweet that changes the business landscape. Until next time.
Cheers, John
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