The Trump administration's opening actions at the helm of the country have left many investors on edge — or in a holding pattern.
An inability to determine which of the administration's policies will stick has led to a lack of certainty in investor decision-making, panelists said at Bisnow's Chicago Capital Markets and CRE Finance event.
And many agreed that the administration's tariffs and immigration actions will likely fuel inflation.
Bisnow/Natalie Popowski
Old National Bank's Seamus O’Mahoney, JLL's Mark Stern, Golub & Co.'s Ryan Lovell, Heitman's Emi Adachi and Greenberg Traurig's Dan Elrod
“There's no doubt we see tariffs and immigration as a negative for most property types ... especially industrial and retail,” Heitman Managing Director Emi Adachi said at the event, held at the Radisson Blu Aqua Hotel.
After the Trump administration's first month of rapid-fire policy announcements, Adachi said there are “a lot of countervailing forces at work” that are influencing investment decisions. Tariffs and immigration policy are poised to be negative for growth and likely inflationary, she said.
Earlier this month, President Donald Trump signed an executive order to enact 25% tariffs on all steel and aluminum entering the U.S. beginning in March. Trump proposed 25% tariffs on goods from Mexico and Canada at the start of February but shelved those for 30 days on Feb. 3 as he continued negotiating with both countries.
Trump’s 10% tariffs on Chinese imports went into effect on Feb. 4, although soon after, he paused levies on small-package goods imported from China and Hong Kong.
Bisnow/Natalie Popowski
Wayland Real Estate Capital's Matthew Berry, Midloch's Andy Sinclair, Cushman & Wakefield's Michael Marks, Alpha Capital's Anthony Longo and Bisnow's Will Follett.
Tariffs and deportations are contributing to existing headwinds for development, said Midloch CEO Andy Sinclair. Tariffs are primed to increase prices on material costs, and fewer people to work construction will raise the cost of labor on projects, he said.
“If anything, it's got to be inflationary,” Sinclair said. “It's got to lead to less development. It's got to make everything more expensive.”
There are early signs that the administration's tariffs, or at least the threat of tariffs, are already increasing prices.
The cost of materials used by the construction industry went up in January at its fastest monthly pace in two years as contractors raced to secure products ahead of expected tariffs. Overall construction input prices rose 1.4% in January from December, a more than 40% increase since February 2020, according to an Associated Builders and Contractors report.
Still, Adachi said there are other policies from the administration that are pro-growth. Stronger economic growth more broadly would serve as a rising tide that lifts all boats across property sectors.
Adachi said it remains to be seen what “wins out” in the balance between policies positive for growth and policies negative for growth.
Bisnow/Natalie Popowski
JLL's Daniel Phelps, CRG's Tom Shanabruch, CBRE's Peter Marino, Nuveen Green Capital's Francisco Crespo and Harrison Street's Michael Borchetta.
Nuveen Green Capital's Francisco Crespo said tariffs have come up as a topic of discussion in a lot of the deals the lender has looked at recently. Most acknowledge tariffs could be a “possible bogey” in deals, but not many are underwriting the risk into actual projects, he said.
Crespo said time will tell whether that is a good strategy and that he wouldn't put out of the realm of possibility that in a year, rescue capital could come in to fill the gap for cost overruns on projects that came out of the ground now under certain assumptions.
It is hard for investors to identify which of the administration's policies are bluster and which are real, said Seamus O’Mahoney, senior vice president at Old National Bank. This impacts some of the certainty industry stakeholders thought they would get in the wake of election results, he said.
“I feel like the markets are good at pricing anything aside from the unknowns,” O'Mahoney said.
Market volatility is what keeps Golub & Co. Chief Investment Officer Ryan Lovell up at night, he said. Uncertainty over where long-term rates will settle, in addition to how federal policies will crystallize, is the key concern.
“We talked about tariffs and immigration policy, and while those things in theory are probably a negative, what's even worse to me is the uncertainty of, ‘Is it going to happen?’” Lovell said. “‘Is it not going to happen?’ So it's that uncertainty. ‘Do we lock it in today? Do we wait to see what tomorrow brings?’”
