IN BRIEF: Today’s Tariffs and the Impact on Commercial Real Estate
Tariffs have become a critical concern in commercial real estate, affecting both ongoing construction projects and the long-term cost structures of ownership and leasing. Historically, tariffs on imports and exports have triggered wide reaching economic effects, and tariffs imposed in 2025 by the Trump administration on certain imports from Canada, Mexico, China and other major U.S. importers are no exception. While these tariffs aim to protect domestic industries and promote economic independence, they will also likely burden developers, landlords, tenants, and contractors through higher material costs, longer lead times, and potential supply shortages.
Construction – Tariffs have been imposed upon essential building materials such as steel, aluminum, timber and lumber, driving up construction costs within the commercial real estate industry. Moreover, searching for alternative supplies is proving to be a difficult task as the tariffs on goods from trading partners have limited the availability of critical building components. Such difficulties are straining the flow of goods between contractors and suppliers, further shifting project costs and timelines. Consequently, builders and developers have been in the process of adjusting budgets to account for these new developments.
Industrial and Logistics – Manufacturers and distributors will likely be affected through higher production costs, reduced profit margins, and increased consumer prices. This is especially true for those who rely heavily on global trade, including many facilities located near active ports. On the other hand, the longer-term goal of the tariffs, namely, to increase domestic production, may eventually benefit the industry by boosting demand for manufacturing and distribution services within the U.S.
Retail – With increased tariffs typically comes increased prices on consumer goods and the inevitable decrease in consumer spending. As a result, retail tenants may struggle which will affect the demand for and occupancy of retail space.
Office – Commercial real estate in the office sector has recently seen an uptick in activity. Such activity could be slowed or halted due to development or renovation delays or in a more extreme case, company downsizing due to the changing economy. Additionally, markets that are particularly reliant on global activity may see a decrease in leasing activity as international relationships adjust.
In sum, tariffs present various risks for commercial real estate development and operations; however, proactive strategies can mitigate these impacts and preserve project profitability. If you or your business may be affected by these changes, please contact Kessler Collins to assist you in navigating these challenges and protecting your interests.
