| TRADE
US – CALIFORNIA
KEY TAKEAWAYS With the return of President Trump and the reintroduction of aggressive tariff policies (dubbed ‘Liberation Day’) investors are facing renewed market volatility. While equities remain sensitive to policy shifts, commercial real estate (CRE) continues to attract institutional and private capital as a more stable, income-generating alternative, particularly in sectors like multifamily housing, healthcare, and life sciences. Tariff-induced cost pressures are reshaping the outlook for CRE. Industrial and logistics assets may benefit long-term from supply chain reshoring, though face near-term margin pressures. Meanwhile, retail and hospitality sectors are more vulnerable to reduced consumer spending and global travel slowdowns.
How will trade wars
properties, offers more predictable cash flows and serves as a hedge against inflationary pressures. In an environment where traditional investment vehicles are underperforming or too risky, CRE stands out for its long-term value and resilience. While the full impact of ‘Liberation Day’ tariffs on CRE is still unraveling, investors can prioritise investment in CRE sectors that will be less affected by tariff fluctuations. The industrial and logistics sector, for instance, may see shifts in demand as domestic manufacturing adjusts to new cost structures. Construction costs for commercial projects may increase by 3-5% as a result of 25% tariffs on steel and aluminum, potentially delaying development projects in the short-term. Industrial tenants engaged in manufacturing or distribution may also face margin pressure due to rising material costs, especially if they rely heavily on imported materials now subject to steep tariffs. This added pressure could result in temporary downsizing, consolidation, or reduced leasing activity in certain logistics hubs. However, in the long-term, some investors expect the industrial sector to benefit from supply chain reshoring and increased domestic production. Beyond industrial warehousing, sectors like multifamily housing, healthcare and life sciences generally tend to remain resilient during economic downturn. These sectors have historically been driven primarily by long-term needs of tenants, providing more insulation from the direct impacts of international
trade policy. However, in addition to tariffs, the Trump administration has made drastic budget cuts to the National Institute of Health (NIH), the National Science Foundation (NSF), and other grant programs which had been funding growth in the life sciences sector. Several life science companies have already announced significant layoffs as a result of lost funding. On the other hand, sectors like retail and hospitality may be more acutely affected by a slowdown in economic activity and global trade due to their strong dependence on consumer spending and international travel. These sector-specific impacts are already shaping landlord and tenant priorities in leasing. Landlords may benefit from securing long-term, stable tenants to mitigate risks associated with current market volatility and potential delays in new developments caused by higher building expenses. Meanwhile, tenants will likely prioritise flexibility in lease terms and seek spaces that offer operational adaptability and lower overall occupancy costs. Overlaying these economic and leasing shifts are potential regulatory changes influencing CRE dynamics, including the anticipated rollback of ESG (Environmental, Social, and Governance) regulations. Similar to Trump’s recent anti-DEI efforts, we could see a divisive move away from federal ESG focus, particularly related to energy efficiency and climate resilience, altering investor and tenant behavior. Some developers and investors may welcome reduced regulatory burdens, contributing to the attractiveness of CRE investment amid a fluctuating market. The potential dismantling of ESG initiatives may dampen investor appetite for eco-friendly projects, such as wind farms and solar. Nevertheless, institutional and international investors continue to focus investment on ESG- aligned assets, indicating sustainable CRE remains a key component in diversified, forward-looking portfolios. Despite ongoing volatility in equity markets and increased opposition to U.S. fiscal and trade policy, CRE will continue to be a widely sought investment vehicle due to its relatively stable legal framework and attractive yields compared to other global markets.
impact real estate?
Robert Blanchard & Rachel Forster Co-Founder & Attorney, Blanchard, Krasner & French Q1
Proposed rollbacks of ESG policies may influence investor behaviour and asset
Robert Blanchard and Rachel Forster have more than forty-seven years of combined experience representing real estate investment groups, individual real estate investors (U.S. and Non-U.S.), commercial lenders, developers, landlords and tenants. Recent transactions include purchases, sales, exchanges and financings for hotels, shopping centers, office condominiums, industrial, retail, NNN single tenant and warehouse/logistics properties. Leasing representations include a multi-floor corporate headquarters for a public pharmaceutical company, U.S. retail store locations for a European clothing line and ground leases for hotel and industrial properties under development. Bob and Rachel, together with the other real estate team members, work closely together to provide clients the immediate attention and expertise necessary for today’s real estate professionals to navigate the complexities of investment in U.S. real estate.
valuation. While some developers welcome reduced compliance burdens, global investors continue to prioritise sustainability, keeping demand strong for ESG-aligned real estate assets.
Real estate is the ultimate safe haven when market stability fractures, but will recessionary pressures erode the tenant base?
“Institutional and private investors are gradually turning to CRE as a more stable asset class compared to stocks as they liquidate assets from an erratic market.”
Since President Trump’s return to office, the United States has
experienced heightened trade tensions and increased market instability. In a controversial effort to revitalise domestic manufacturing, on April 2 the Trump administration introduced sweeping tariffs on imports during what the administration dubbed ‘Liberation Day.’ The new tariff policy imposed a blanket 10% tariff on all imported goods, with reciprocal tariffs to remedy professed trade imbalances. The announcement shocked the global market, prompting a sharp and swift decline in the U.S. stock market in anticipation of significant trade wars and retaliatory tariffs. Just weeks after unveiling the self- proclaimed ‘Liberation Day’ regulations, Trump agreed to a 90-day pause on implementing the new tariff policies. While the stock market saw a temporary rebound following the announcement, the broader economic impact of these erratic policy shifts continues to unfold. Investors fear sustained market volatility, higher inflation, and slower economic growth amid the global panic. Despite the pause, the average effective U.S. tariff rate remains over 20% – the highest effective rate since 1910. Amid this turbulence, can investors
ABOUT US... bkflaw.com
+1 858 551 2440 bblanchard@bkflaw.com irglobal.com/advisor/robert-blanchard
+1 858 551 2440 rforster@bkflaw.com irglobal.com/advisor/rachel-e-forster
For the past 33 years, Blanchard, Krasner & French has successfully provided legal counsel for the business and personal needs of our clients. We help businesses and individuals navigate through complex business, real estate, and financing transactions. We assist clients in taking advantage of tax and asset protection laws to effectively plan for the future. We also zealously enforce and protect their rights through litigation when necessary. We are unique in our dedication to offering
turn to commercial real estate (CRE) as a safe haven despite concern that tariffs will erode the tenant base? While investor confidence remains shaken, we expect CRE to be poised for significant change and renewed investor interest. Historically, CRE has served as a refuge for both U.S. and foreign investors during times of economic uncertainty,
and the unfolding global situation is no exception. Institutional and private investors are gradually turning to CRE as a more stable asset class compared to stocks as they liquidate assets from an erratic market. Stocks remain highly sensitive to market sentiment and policy shifts, while investment in real estate, particularly in income-generating
high quality legal support while maintaining accessibility, assistance and attention. Our team does not work for BKF, they work for the clients we serve.
irglobal | 13
12 | irglobal
Made with FlippingBook - professional solution for displaying marketing and sales documents online