In the wake of the sweeping tariffs announced by the Trump Administration on April 2, commercial real estate may emerge as a safe harbor for investors navigating an increasingly volatile economic landscape. Manus Clancy, head of data strategy at LightBox, makes a compelling case for why CRE could outperform other asset classes during this period of uncertainty. His analysis, coupled with recent data from LightBox’s CRE Activity Index, paints a picture of resilience within the sector.
Clancy argues that the first quarter of 2025 was marked by significant volatility, with sharp swings in equity prices and interest rates. Despite these challenges, CRE investors and lenders appeared unfazed, as evidenced by a surge in activity within the sector. According to Clancy, "The LightBox CRE Activity Index hit a multi-year high in March," signaling robust demand for commercial property appraisals, environmental due diligence reports, and property listings. This resilience suggests that CRE may be better positioned to weather the economic fallout from the new tariffs compared to other asset classes.
One key reason for this optimism lies in the relative insulation of existing properties from tariff-related cost increases. Unlike new developments heavily reliant on construction materials and supply chains impacted by tariffs, existing CRE assets face fewer cost pressures. Clancy explained that stabilized properties in sectors like multifamily housing require maintenance expenditures, such as carpets or appliances, but these costs pale in comparison to those faced by developers or manufacturers in tariff-sensitive industries like apparel.
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Breaking down the performance potential by property type, Clancy highlights several areas of strength and concern. Multifamily housing stands out as a safe harbor due to its reliance on existing supply rather than new development. Landlords of stabilized properties are less exposed to tariff-driven cost increases than developers or consumer product manufacturers. Industrial properties, including self-storage facilities and distribution centers, are similarly well-positioned. Operators like Amazon and FedEx typically hold long-term leases, making it unlikely for tariffs to significantly impact lenders. Senior living facilities, student housing, and nursing homes also benefit from stable operating costs tied to existing inventory.
Hotels, however, could face challenges if a recession dampens business travel or international tourism. Retail properties are the most vulnerable segment within CRE. Already struggling due to e-commerce competition since 2015, retailers may see accelerated store closures or bankruptcies if sales decline further under tariff pressures. Office spaces continue to grapple with the fallout from remote work trends but may stabilize similarly to multifamily housing if existing operators can maintain their positions.
Despite these strengths, Clancy acknowledges two critical caveats that could undermine CRE’s safe-haven status.
First, landlords may struggle to refinance debts if lenders retreat from financing CRE deals, as they did during early COVID-19 or after the collapse of Silicon Valley Bank.
Second, if tariffs persist for an extended period and trigger a deep recession, even relatively immune segments like industrial properties may not escape widespread economic damage.
Adding weight to Clancy’s observations is LightBox’s recent report on its CRE Activity Index, which reached 104.4 in March—the highest level since June 2022 and only the second triple-digit reading in nearly three years. The index measures national activity across property listings, environmental due diligence reports, and appraisals—key indicators of transactional momentum in CRE. March’s 4.7% month-over-month increase and 25.2% year-over-year surge reflect growing investor confidence despite broader market volatility.
Each component of the index showed significant growth over recent months. Property listings soared year-over-year, more than doubling their levels at the end of 2024. Phase I environmental site assessments rose modestly compared to last year but jumped significantly over February volumes. Lender-driven commercial appraisal awards also increased both year-over-year and month-over-month.
This uptick occurred against mixed economic signals: rising inflation (as measured by core PCE), weakening consumer sentiment, and concerns over supply chain disruptions tied to tariffs. Yet LightBox’s analysis suggests that CRE may be decoupling from broader market volatility as investors gravitate toward income-producing assets and distressed opportunities.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
