Navigating Tariff Uncertainty: Implications for Retail and Commercial Real Estate

The global tariff landscape has undergone seismic shifts since 2023, with the U.S. implementing a 10% across-the-board tariff on most imports and sector-specific duties as high as 25% on metals and automobiles [1]. These policies, coupled with retaliatory measures from China and other trading partners, have disrupted supply chains and introduced volatility into commercial real estate markets. For investors in retail and industrial real estate, the challenge lies in balancing tenant performance forecasting with the need to build supply chain resilience amid persistent trade uncertainties.

Retail Real Estate: A Market in Transition

Tariffs have directly impacted retail real estate by inflating construction costs for materials like steel and lumber, which have seen price surges of 34% since 2020 [3]. This has led to delays and cancellations in new development projects, particularly in multifamily and industrial sectors. Retailers, facing higher consumer prices due to tariffs on imported goods, are recalibrating their strategies. According to a report by Yardi Matrix, U.S. multifamily markets absorbed over 250,000 apartment units through May 2025, but tariff-driven uncertainty continues to dampen long-term business planning, especially in high-cost coastal regions [1].

Retailers are also grappling with shifting consumer behavior. As tariffs push up the cost of goods, foot traffic in traditional shopping centers has declined, forcing landlords to prioritize tenant mix optimization. A survey by CenterCheck reveals that 54% of shopping center owners now rely on predictive analytics to evaluate tenants and forecast rent growth, integrating metrics like foot traffic and consumer spending patterns into their models [4]. These tools help mitigate risks from tariff-related demand volatility while aligning with the rise of omnichannel retail strategies.

Industrial Real Estate: Resilience Amid Reconfiguration

The industrial sector, though resilient, is not immune to tariff-driven disruptions. The Port of Los Angeles, a critical gateway for U.S. imports, saw a 35% decline in arriving cargo vessels by May 2025, reflecting broader supply chain bottlenecks [2]. In response, companies are decentralizing logistics networks, favoring inland hubs like Columbus, Ohio, and Greenville, North Carolina, to reduce dependency on coastal ports [5]. This shift has spurred demand for mid-sized warehouses and distribution centers in secondary markets, with Q1 2025 leasing reaching 123.3 million square feet [3].

However, rising construction costs and labor shortages—exacerbated by stricter immigration policies—pose challenges for developers. To address these, firms are adopting strategies such as front-loading material procurement and diversifying supply chains. For example, JLL reports that industrial occupiers are increasingly partnering with third-party logistics (3PL) providers to enhance supply chain visibility and flexibility [2]. These partnerships allow businesses to navigate tariff uncertainties while maintaining operational efficiency.

Tenant Performance Forecasting: Integrating Tariff Risks

The uncertainty surrounding tariffs has forced real estate professionals to refine tenant performance forecasting models. European prime real estate markets offer a useful benchmark: projected returns of 8.1% annually for 2025–2029 already account for a 10% tariff scenario, with prime office markets expected to yield 9.5% annually [2]. In the U.S., models are incorporating variables such as interest rates, inflation, and sector-specific vulnerabilities, particularly in hospitality and retail.

For instance, Florida’s CMBS hotel market has become a bellwether for tariff-related distress, with over 86 hotels entering special servicing by mid-2025 due to elevated interest rates and softening net operating income (NOI) [4]. This underscores the need for forecasting models to account for macroeconomic interdependencies, including trade policy shifts and refinancing risks.

Strategies for Resilience

To navigate these challenges, real estate firms are adopting a multidisciplinary approach. Deloitte highlights the importance of cross-functional collaboration between finance, legal, and supply chain teams to ensure that reconfiguration efforts align with compliance and operational goals [1]. Automation and AI-driven analytics are also gaining traction. For example, AI-powered business intelligence dashboards are being used to forecast commercial property trends and tenant retention metrics, enabling real-time adjustments to leasing strategies [5].

Geographic diversification is another key tactic. Investors are prioritizing regions with stable trade environments, such as the U.S. Southeast, Central and Eastern Europe, and the UAE [3]. These markets offer access to domestic supply chains and reduced exposure to retaliatory tariffs.

Conclusion

The interplay between tariffs and real estate markets is complex, but opportunities abound for investors who prioritize adaptability. Retailers must balance tenant performance forecasting with agile supply chain strategies, while industrial real estate players should focus on decentralization and technology-driven efficiency. As tariff uncertainties persist, the ability to integrate macroeconomic risks into forecasting models—and to act decisively on insights—will separate resilient portfolios from vulnerable ones.

Source:
[1] Strategies for tariff uncertainty [https://www.deloitte.com/us/en/insights/topics/leadership/strategies-tariff-uncertainty.html]
[2] 2025 Mid-Year European Outlook: Still On Track, Despite ... [https://www.aew.com/research/2025-mid-year-european-outlook-still-on-track-despite-tariffs]
[3] Real Estate Investment In The Era Of Trade, Tariff Changes [https://www.forbes.com/councils/forbesfinancecouncil/2025/07/14/real-estate-investment-in-the-era-of-trade-tariff-changes-challenges-and-opportunities/]
[4] The Bellwether State Florida’s CMBS Hotel Defaults as a National Indicator [http://www.matthews.com/insights/]
[5] Integrating AI-Powered Business Intelligence Dashboards to Forecast Commercial Property Trends and Tenant Retention Metrics [https://www.researchgate.net/publication/394342000_Integrating_AI-Powered_Business_Intelligence_Dashboards_to_Forecast_Commercial_Property_Trends_and_Tenant_Retention_Metrics]