Commercial Real Estate Impacts from Global Trade Tension

As we navigate through 2025, the United States economy presents a complex landscape influenced by recent policy changes and market dynamics that suggest there will be commercial real estate impacts. The introduction of new tariffs has heightened concerns about a potential trade slowdown, leading to notable stock market volatility. These developments have significant implications for the commercial real estate sector, particularly for office and industrial properties.​

National Economic Overview

The imposition of tariffs has cast uncertainty over international trade, directly affecting industries reliant on global supply chains. Warehouse-focused real estate companies, such as Prologis, have experienced substantial stock declines—approximately 12% since early April—due to fears of reduced trade volumes and oversupply in warehouse capacity. Additionally, tensions with key trading partners, notably Canada, have led to hesitancy among foreign investors who have historically been significant players in the U.S. real estate market which suggests widespread commercial real estate impacts.

Impact on Industrial Real Estate

The industrial real estate sector, particularly properties near major ports, faces challenges due to the anticipated decrease in international trade. Prized seaside warehouses, which thrived during globalization, are now at risk of lower occupancy rates and decreased property values. Conversely, inland regions may see opportunities as supply chains adjust, potentially benefiting areas like Arizona, Georgia, and regions near the Mexican border.

Office Market Dynamics

Despite broader economic uncertainties, certain office markets demonstrate resilience from common commercial real estate impacts. For instance, Manhattan has seen a resurgence in office leasing activity, with significant deals such as Goodwin Procter’s 250,000 square-foot lease in Midtown South, indicating renewed confidence in urban office spaces.

Las Vegas Market Insights

Focusing on Las Vegas, the industrial and office real estate markets exhibit unique trends:​

• Industrial Sector: In Q3 2024, Las Vegas added nearly 3 million square feet of industrial space, primarily in North Las Vegas. This influx contributed to a rise in vacancy rates, reaching 8.0%. However, asking rents have plateaued at $1.11 per square foot per month, reflecting a deceleration in rent growth due to increased supply. ​United States+5United States+5Colliers+5

• Office Sector: The Las Vegas office market maintains a direct vacancy rate of 14.6%, which, while slightly elevated, remains below national averages. Direct asking rents have reached a decade-high of $30.47 per square foot, driven by limited availability of new buildings and strong demand for modern spaces. Notably, submarkets such as Summerlin and the Southwest lead in pricing, with rents at $35.53 per square foot.

Strategic Recommendations for Property Owners

Given the current economic environment, property owners should consider the following strategies:

1. Diversify Tenant Mix: Aim to attract tenants from various industries to mitigate sector-specific risks, especially in industrial properties affected by trade fluctuations.​WSJ+1WSJ+1

2. Enhance Property Features: Invest in modern amenities and sustainable practices to make office spaces more appealing, aligning with the growing demand for quality and environmentally friendly workplaces.​

3. Monitor Market Trends: Stay informed about local and national economic indicators to make proactive leasing and investment decisions.​

4. Leverage Submarket Strengths: In Las Vegas, focus on high-demand areas like Summerlin and the Southwest for office investments, where rent growth and occupancy rates are more favorable.

By adopting these approaches, property owners can navigate the current market complexities and position themselves to capitalize on emerging opportunities in the commercial real estate landscape.

Commercial Real Estate Impacts: What To Look Out For​

Business and commercial real estate (CRE) supply and demand are deeply influenced by several macroeconomic and financial indicators. Here are the most important factors to track regularly as commercial real estate impacts—especially for office and industrial property owners and investors:

🏛️ Federal Reserve & Monetary Policy

1. Federal Funds Rate

• Why it matters: This is the benchmark interest rate set by the Fed. It affects borrowing costs for banks, which trickles down to loans and mortgages for businesses and CRE investors.

• Impact on CRE:

  • Higher rates = Higher borrowing costs = Slower CRE investment & development.

  • Lower rates = More favorable financing = Increased demand for CRE.

2. Quantitative Easing (QE) or Tightening (QT)

• Why it matters: When the Fed buys bonds (QE), it injects liquidity into the market. QT does the opposite.

• Impact on CRE: QE generally boosts asset values, including CRE. QT can contract liquidity, decreasing investment appetite.

💰 Interest Rates & Credit Markets

3. 10-Year Treasury Yield

• Why it matters: The 10-year yield is a benchmark for long-term interest rates and is used to price commercial real estate loans.

• Impact on CRE:

  • Rising yields = Rising cap rates = Lower property values.

  • Falling yields = Lower borrowing costs = Higher asset valuations.

4. Mortgage Rates (Commercial & Corporate Loan Spreads)

• Why it matters: These determine the actual borrowing cost for purchasing or refinancing CRE.

• Impact on CRE: Expensive debt discourages acquisitions and new development; affordable debt fuels growth.

📈 Economic Indicators with Commercial Real Estate Impacts

5. GDP Growth

• Why it matters: Strong GDP growth supports business expansion and job creation.

• Impact on CRE: Higher growth = Greater demand for office, industrial, and retail space.

6. Unemployment Rate & Job Growth

• Why it matters: Employment directly impacts office demand (more jobs = more office users).

• Impact on CRE: Lower unemployment = Higher demand for office/industrial space; higher unemployment softens demand.

7. Inflation (CPI, PCE)

• Why it matters: Rising prices erode purchasing power and can lead to Fed rate hikes.

• Impact on CRE:

  • Moderate inflation can boost rent and asset values.

  • High inflation usually leads to rate hikes, hurting valuations and investor sentiment.

🏗️ Real Estate-Specific Indicators

8. Construction Starts & Permits

• Why it matters: Measures supply coming online.

• Impact on CRE: High supply with flat demand = downward pressure on rents and prices.

9. Vacancy & Absorption Rates

• Why it matters: Tracks current space availability and leasing activity.

• Impact on CRE: Rising vacancies = oversupply or weakening demand; falling vacancies signal strong demand.

10. Cap Rates (Capitalization Rates)

• Why it matters: Reflects return expectations and risk premiums.

• Impact on CRE: Low cap rates = high asset pricing (usually tied to low interest rates); rising cap rates typically reduce valuations.

🌎 Other Important Influences

11. Consumer & Business Confidence (e.g., University of Michigan Consumer Sentiment, NFIB Small Business Optimism)

• Why it matters: Confidence levels guide spending, hiring, and investment.

• Impact on CRE: High confidence = more business activity = higher space demand.

12. ISM Manufacturing & Services Indices

• Why it matters: These are leading indicators of economic health.

• Impact on CRE:

  • Strong manufacturing = higher industrial demand.

  • Growing services = more office and tech space demand.

🛠️ Localized and Microeconomic Factors with Commercial Real Estate Impacts

These broader indicators interact with:

• Local job growth and population trends

• Infrastructure developments (e.g., highway access, ports)

• Zoning regulations and tax incentives

• Business migration trends (e.g., firms moving from CA to NV)