This quarter has delivered no shortage of breaking news. Donald Trump’s flurry of policy moves injected a potent mix of volatility and uncertainty into the market, sending risk assets swinging in what can only be described as schizophrenic leaps and dives, as investors scramble for signals in an environment where clarity is scarce.  

After an extraordinary stretch of equity volatility—hitting the 99th percentile relative to the past 50 years—markets have cooled modestly; yet beneath the surface, the fundamental narrative remains unresolved, with bulls and bears locked in a tactical stalemate as policy gyrations, macro data, and global capital flows offer up conflicting signals.

On the commercial real estate front, the most immediate and unambiguous transmission channel from policy to fundamentals has been tariffs—specifically on steel, aluminum, lumber, and Chinese manufactured elements. Apartment development costs are projected to rise by as much as $10,000 per unit¹, while commercial construction budgets are facing estimated increases of up to 10%², largely a function of the newly imposed 25% steel and aluminum tariffs and the 34.5% Canadian lumber levy.

Importantly, these cost pressures are compounding atop an already historically stretched construction environment, with input costs up ~34% since 2020³; when layered with high financing costs and softening market conditions, the outlook points to a meaningful contraction in new supply pipelines over the next several years.

The COVID-era supply chain squeeze set off a construction surge in logistics real estate, as developers raced to meet the unprecedented demand for import-driven e-commerce fulfillment. By mid-2023, the pace of new industrial deliveries had peaked at more than double pre-pandemic levels, concentrated around key port markets like California, Texas, and South Carolina, as well as critical inland logistics nodes across the U.S. heartland. With the latest tariff waves, we’ve seen a short-term demand surge as tenants rush to stockpile inventory ahead of price escalations; however, this spike is unlikely to persist.

Forward-looking trade estimates suggest that, absent a meaningful on-shoring push or export boom, warehouse and distribution demand could contract by ~10% over the next two years⁴. Some of this demand may rotate into long-neglected industrial segments (manufacturing, flex, etc.) particularly in cost-effective Midwestern and Sunbelt markets, as companies recalibrate supply chains toward a more fragmented, sovereign-self-reliant global framework.

For sectors like office, retail, multifamily, and hospitality, the impact of tariffs is less direct but no less intriguing. On one hand, firms like Volvo, Cleveland-Cliffs, BMW, Aston Martin, Saks, and UPS are downsizing their U.S. operations as they anticipate tariffs to sap demand and hurt profitability⁵; while on the other, firms like Apple, Chobani, Johnson & Johnson, AstraZeneca, ASM International, JCB, Hyundai, and Samsung have recently signaled they will increase their footprint in the US in order to hedge against tariffs, geopolitical uncertainty, and supply chain risks⁶. It is too early to be certain one way or the other, so we are not anticipating any broad upside or downside to U.S. commercial real estate.

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^{1 – A. J.Johnson Consulting Services, White paper on Construction Costs}

^{2 – News and economic insights on tariff impacts and currency pressures from: Daily Reporter, “Tariff Impact Reaches Residential Construction Industry” (April 2025)}

^{3 – National Association of Home Builders (NAHB), HowTariffs Impact Home Building (Building Materials Trade Policy – NAHB Advocacy)}

^{4 -– RRA estimates that 45% of U.S. commercial real estate space is utilized for imported goods, and projects a 23% decline in import activity due to tariff pressures. This estimate is based on data and analysis from: Tax Foundation,“Trump Tariffs: The Economic Impact of the Trump Trade War”; CBRE, Industrial Real Estate Reports (2023); U.S. Customs and Border Protection, Importers Guide; National Association of Realtors, Commercial Real Estate Market Outlook 2022; Port of Long Beach, 2023 Annual Report; Supply Chain Quarterly, DHL, and the U.S. International Trade Commission (USITC)}

^{5 – General media coverage on geopolitical tensions, supply chain shifts, and economic policy impacts sourced from: The Guardian, The Times (UK), and The New York Post}

^{6 –Multiple corporations have increased U.S.-based manufacturing and re-shoring activity in response to tariff changes (CBS News; Cra-Z-Art; Apple, n.d.;Johnson & Johnson; Chobani; AMTonline.org; WhiteHouse.gov; Governor.NY.gov; Macquarie Group; Brimco.io).}

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