LOS ANGELES—President-elect Donald Trump's trade plans could negatively impact the industrial sector—but they may also help fuel the market. David Shulman, UCLA senior economist for the UCLA Ziman Center for Real Estate and UCLA Anderson Forecast, says that if we start a trade war with China, the West Coast ports and the surrounding industrial markets would see a significant negative impact.
“We are assuming that trade will be more restrictive, more protected and that our exports will be weakened, but we are also assuming that there will be more talk than action,” Shulman tells GlobeSt.com. “If we are going to have a trade war with China, which will mean fewer imports from China, there will be a negative impact on the industrial and the West Coast ports. A trade war would have a negative impact on the underlying demand for industrial, which has been on fire because of ecommerce.” The Ports of Los Angeles, Long Beach, Oakland and Seattle will be most affected.
A trade war would not only be bad for the industrial sector, but may also limit the capital inflow from China, much of which has found its way into the real estate sector either through investment or development. A trade war could bring that capital inflow to a halt. “You might get people rushing right now to get money out, but I think China will stop the outflow of money,” says Shulman. “If it gets ugly, there could be a curtailment of capital outflows. You have to remember that the capital inflow from China is the flipside of the trade deficit. If the trade deficit with China narrows, we could have less inflow capital from China.”
The industrial market has been called the “darling of commercial real estate,” because of the sector's significant and seemingly unstoppable growth. However, don't start trading out of the sector just yet. The industrial market will only see a negative impact if imports decrease, and the UCLA forecast actually predicts an increase in imports—although that would be contrary to Trump's trade goals. “Our forecast actually gave an increase in imports, which would be good for industrial, because we are predicting a consumption boom as a result of tax cuts,” explains Shulman. “If that happens, we would suck in more imports. Additionally, the high dollar makes imports much cheaper, so we think the trade deficit could get worse rather than better. That is opposite from what president elect Trump has been talking about.”
LOS ANGELES—President-elect Donald Trump's trade plans could negatively impact the industrial sector—but they may also help fuel the market. David Shulman, UCLA senior economist for the UCLA Ziman Center for Real Estate and UCLA Anderson Forecast, says that if we start a trade war with China, the West Coast ports and the surrounding industrial markets would see a significant negative impact.
“We are assuming that trade will be more restrictive, more protected and that our exports will be weakened, but we are also assuming that there will be more talk than action,” Shulman tells GlobeSt.com. “If we are going to have a trade war with China, which will mean fewer imports from China, there will be a negative impact on the industrial and the West Coast ports. A trade war would have a negative impact on the underlying demand for industrial, which has been on fire because of ecommerce.” The Ports of Los Angeles, Long Beach, Oakland and Seattle will be most affected.
A trade war would not only be bad for the industrial sector, but may also limit the capital inflow from China, much of which has found its way into the real estate sector either through investment or development. A trade war could bring that capital inflow to a halt. “You might get people rushing right now to get money out, but I think China will stop the outflow of money,” says Shulman. “If it gets ugly, there could be a curtailment of capital outflows. You have to remember that the capital inflow from China is the flipside of the trade deficit. If the trade deficit with China narrows, we could have less inflow capital from China.”
The industrial market has been called the “darling of commercial real estate,” because of the sector's significant and seemingly unstoppable growth. However, don't start trading out of the sector just yet. The industrial market will only see a negative impact if imports decrease, and the UCLA forecast actually predicts an increase in imports—although that would be contrary to Trump's trade goals. “Our forecast actually gave an increase in imports, which would be good for industrial, because we are predicting a consumption boom as a result of tax cuts,” explains Shulman. “If that happens, we would suck in more imports. Additionally, the high dollar makes imports much cheaper, so we think the trade deficit could get worse rather than better. That is opposite from what president elect Trump has been talking about.”
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