While tariffs' relationship to CRE is not obvious, the impact on our business is real, according to a recent article in Forbes online by Jeff Levin. Here are four areas of impact:
1. Trade wars helped close the spigot on Chinese investment.
By 2016, Chinese CRE purchases in the US rose to $46 billion. However, in the first half of 2018, Chinese investment here dropped 90 percent.
2. A Chinese sell-off is depressing CRE prices.
Beijing has ordered Chinese institutions to sell off CRE assets after short-term holding periods, thus impacting equity gains and artificially bumping the supply of properties.
3. Prices are climbing for construction materials.
For example, the Trump administrations first big tariff slammed all importers of steel to the US with a 25 percent tariff, 10 percent for aluminum.
4. Disruptions in materials and labor supplies are causing construction delays.
One analysis found that hospitality groundbreakings we down 39 percent compared to 2017, while retail starts down 47 percent and office buildings down a whopping 75 percent!
In the final analysis, the only certainty is uncertainty while this tit-for-tat trade spat continues. However, we know that with volatility comes opportunity for some...but not all.