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Understanding the Impact of Tariffs on Industrial Real Estate

The impact of tariffs on industrial real estate is complex and constantly evolving. As global supply chains shift, investors, landlords, and occupiers need to understand how tariffs affect leasing, buying, and selling industrial space. Tariffs influence everything from pricing structures to supply chain decisions, ultimately shaping demand for industrial properties.

In Episode 55 of The Real Finds Podcast, Scott Robinson, Senior Vice President of Plymouth Industrial REIT and Professor at NYU’s Schack Institute, explains how tariffs affect capital markets, manufacturing trends, and property demand in the industrial sector. While there is no universal answer, the ability to adapt to trade policy changes is critical for businesses looking to optimize their real estate strategies in 2025 and beyond.

Tariffs and Industrial Real Estate Transactions

How Tariffs Influence Buying and Selling Industrial Space

For industrial investors, tariffs can impact property valuations, tenant demand, and long-term investment potential.

Higher tariffs on imported goods can encourage companies to relocate production closer to the U.S. to avoid additional costs. This shift can increase demand for manufacturing and logistics space in key regions such as Texas, Ohio, and border states like Arizona and California. Investors looking to capitalize on this trend should focus on markets positioned to benefit from reshoring efforts.

With rising production costs in Asia, certain companies are already considering manufacturing hubs in North America. For investors, this means targeting locations with strong infrastructure and skilled labor pools. Areas near major transportation corridors, ports, and inland logistics hubs may see an increase in demand for industrial space.

However, market volatility remains a challenge. The unpredictability of trade policies can create uncertainty in industrial real estate transactions. Investors must monitor tariff regulations closely to anticipate market shifts. If tariffs remain a long-term fixture in global trade policy, they could permanently alter the industrial property landscape.

How Tariffs Affect Leasing and Occupier Strategy

For industrial tenants, tariffs play a crucial role in site selection and leasing decisions. Companies that rely on international supply chains must evaluate their exposure to potential cost increases due to changing trade policies.

One of the most significant factors is lease flexibility. Businesses hesitant about long-term trade policies may prefer shorter lease terms or flexible agreements that allow them to relocate operations if needed. This has led to growing interest in multi-tenant industrial properties and flexible lease structures.

When selecting an industrial facility, companies should assess the total cost of occupancy. While tariffs can increase the cost of imports, other factors such as energy prices, property taxes, and labor expenses must also be considered. Tariffs may be just one part of a company’s overall cost structure, but they can have a cascading effect on decision-making.

In terms of location strategy, companies are prioritizing industrial spaces that provide better access to domestic supply chains. Locations near inland ports, distribution hubs, and major population centers are becoming more desirable, reducing reliance on international shipments.

Key Investment Strategies for Navigating Tariff Uncertainty

1. Focus on Markets Benefiting from Reshoring and Nearshoring

Tariff uncertainty is prompting companies to reevaluate their global supply chains. Many businesses are exploring reshoring, which involves bringing production back to the U.S., or nearshoring, which shifts operations to nearby countries like Mexico or Canada.

Investors should focus on markets positioned to benefit from this trend. Industrial hubs with strong transportation infrastructure and labor availability will attract companies looking to relocate their operations. Proximity to key consumer markets is also essential, as many businesses aim to reduce supply chain disruptions and transportation costs.

States with economic incentives for manufacturing and logistics companies may also see increased demand for industrial real estate. Understanding how state-level policies support manufacturing growth can help investors identify strategic investment opportunities.

2. Consider Energy and Labor Costs When Evaluating Investments

While tariffs may encourage companies to move production closer to home, the cost of doing business in the U.S. remains a major consideration. High labor costs and energy expenses can offset the benefits of avoiding tariffs on imports.

Energy prices are becoming an increasingly important factor in industrial site selection. Companies with high power consumption, such as those in manufacturing and logistics, are looking for locations with reliable and cost-effective energy sources. Investors should consider whether a property is equipped to handle tenants with high energy demands and whether state energy policies are favorable for industrial growth.

Labor availability is another key consideration. While some companies are willing to pay a premium for a skilled workforce, others may prefer locations with lower wage costs. This can influence where industrial development occurs, with companies balancing cost savings against operational efficiency.

3. Prioritize Flexible Industrial Space

With trade policies subject to change, companies are seeking greater flexibility in their industrial real estate decisions. This trend is leading to increased demand for multi-tenant industrial properties and shorter lease terms.

Investors should consider acquiring or developing industrial assets that allow tenants to scale operations based on changing needs. Facilities that offer adaptable layouts, expansion potential, and strategic locations will remain in high demand.

Shorter lease agreements are also becoming more common. Many companies are hesitant to commit to long-term leases if trade policy shifts could make certain locations less desirable. Landlords offering more flexible lease structures may attract a broader range of tenants looking for adaptable solutions.

4. Monitor Tariff Policy and Supply Chain Trends

Because tariff regulations are subject to change, investors must stay informed about how trade policy affects industrial real estate.

Regularly tracking tariff announcements, trade agreements, and global manufacturing trends can provide insight into how the industrial market will evolve. Understanding how companies adjust their supply chains in response to tariffs can help investors anticipate shifts in demand.

Engaging with industrial tenants can also provide valuable information. By understanding how occupiers are adapting to new trade policies, investors can better position their assets to meet tenant needs.

Final Thoughts: Are Tariffs a Net Positive or Negative for Industrial Real Estate?

Scott Robinson believes that tariffs are likely to have a neutral to positive impact on the U.S. industrial real estate market. While they introduce short-term uncertainty, they also drive long-term trends such as reshoring, supply chain restructuring, and increased domestic manufacturing.

Despite the potential for tariffs to boost demand for U.S. industrial space, challenges remain. Labor costs, energy prices, and the overall cost of doing business in the U.S. can make reshoring less attractive for some companies. Investors and occupiers must carefully assess these factors when making real estate decisions.

For investors, the key takeaway is to focus on markets positioned to benefit from shifts in global trade policy. Industrial hubs with strong transportation networks, favorable energy costs, and access to skilled labor will remain competitive. Companies looking for industrial space should evaluate total occupancy costs and consider lease structures that provide flexibility in an evolving trade environment.

Key Takeaways for Investors and Occupiers

For industrial investors:

• Focus on regions that stand to gain from reshoring and supply chain adjustments.
• Consider energy costs and labor availability when evaluating potential acquisitions.
• Invest in properties that offer flexibility and appeal to a broad range of tenants.
• Monitor trade policy changes to stay ahead of market trends.

For industrial occupiers:

• Evaluate the total cost of occupancy, including tariffs, taxes, energy, and labor costs.
• Look for lease terms that provide flexibility in case of shifting trade policies.
• Consider locations that reduce supply chain risk and transportation expenses.
• Engage with landlords who understand the impact of tariffs on industrial operations.

The industrial real estate sector is evolving as businesses navigate changing trade dynamics. By staying informed and strategically positioning assets, investors and occupiers can capitalize on emerging opportunities in the market.

For more insights, watch the full conversation with Scott Robinson on The Real Finds Podcast:

Watch Now → https://youtu.be/ezxjXqOl7b8