|
Here's what I've got for you this week.
- The impact of tariffs on commercial real estate
I waited a day to send this week's newsletter to be able to interpret today's tariffs announcement by POTUS. Full analysis below.
- Cores Real Estate - Sponsored
Our client is wrapping up a multifamily offering in North Carolina and has only 6 spots left ($50,000 minimum). More details here and below.
- Podcast Episode 711: SEC Rules you must know
Guest this week, Franklin Spees, has worn just about every hat in the real estate game - lawyer, city planner, broker, property manager, investor, and now, a capital allocator. Listen to his story in this week's episode.
- BV Capital - Sponsored
In their latest offering, BV Capital are developing a 248-unit, Class A, ground up multifamily property in the Dallas-Fort Worth metro. Learn more here - and below.
- Investor Relations position: One of our clients, a family office with around $350MM of multifamily AUM, is looking to hire an investor relations professional. Competitive pay and bonuses. Remote position. Please reply to this email if you, or someone you know, would like more information.
- Startengine Shares for sale: A friend of mine has some of his shares for sale in StartEngine, the largest equity crowdfunding website in the US. StartEngine just released their 2024 financials with over $48M in revenues in 2024, YoY revenue growth of 100%+, and a current $70M+ revenue run rate (based on Q4 2024 revenues). He is looking to sell some of his shares (Preferred Stock) to buy a home. The minimum transaction size he is targeting is $100k and he and some friends have $3M+ worth of shares to sell (and possibly more). Pricing will depend on the size of the buyer’s interest (larger size will get a larger discount) and will be based on the current open round’s price of $1.25/share.
Let me know if this is of interest and I'll put you in touch.
Plus, a reminder of two main initiatives this year:
As always, please do not hesitate to email me directly if you have any questions.
Best,
Adam
***
The Impact of Tariffs on CRE
As President Trump announced sweeping new trade measures from the White House Rose Garden today, we, as real estate sponsors and investors, are once again navigating shifting ground. Here's a breakdown of what to expect from today’s announcements: how tariffs might affect real estate deals in the short, medium, and long term, and what that means for your next acquisition or investment decision.
Trump has already implemented several significant trade measures, including 25% tariffs on steel and aluminum (effective March 12, 2025), targeted 25% tariffs on goods from Canada and Mexico, and 10% tariffs on Chinese imports.
And today, the President announced the most aggressive step yet:
- A 10% baseline tariff on all imported goods, effective immediately, as part of a new “reciprocal tariff” policy, with higher rates targeting specific countries—including 34% on imports from China, 24% from Japan, and 20% from the EU.
- A 25% tariff on foreign-made automobiles will go into effect on April 3, followed by a 25% tariff on select auto parts no later than May 3.
- The expiration of USMCA exemptions means imports from Canada and Mexico are no longer shielded and are now subject to the new tariff structure.
The stated goal? Reciprocity: “They do it to us and we do it to them.”
But for CRE stakeholders, the implications are far more nuanced.
Short-Term Impacts (0–12 Months)
Broader Economic Effects
- Reduced Economic Growth:
With today’s announcement adding fuel to the fire, economists expect GDP growth to fall from 2.8% in 2024 to 1.7% in 2025, a decline of 1.1 percentage points.
- Increased Inflation:
Core inflation could rise 0.4% above baseline projections, averaging 3.1% for the year, potentially higher if tariffs stick. A 20% broad tariff could lift consumer prices by 2.1–2.6% in the short run.
- Interest Rate Pressure:
The Fed may be forced to delay rate cuts due to tariff-driven inflation, keeping borrowing costs higher than many had priced in.
Direct CRE Impacts
- Rising Construction Costs:
With new import tariffs, CBRE now projects construction costs could spike up to 5–7%, especially in steel-heavy projects.
- Project Delays and Uncertainty:
Today’s policy shift will exacerbate hesitation across development and financing decisions.
- Property Type Variations:
Industrial and retail will be hit hardest first, especially where pricing power is weakest.
- Investment Hesitancy:
Transaction volume may stall as deal underwriting adjusts to tighter spreads and inflated replacement costs.
Medium-Term Impacts (1–3 Years)
Broader Economic Effects
- Gradual Economic Adjustment:
Businesses will begin reorganizing operations, but with GDP still projected to underperform by 0.1–0.2% in 2026.
- Persistent Inflation:
Household costs may rise by over $1,200 annually, more than the average benefit of any potential renewed tax cuts.
- Monetary Policy Challenges:
A potentially stagflationary environment will keep the Fed walking a tightrope.
Direct CRE Impacts
- Supply-Demand Rebalancing:
New construction continues to slow, driving value to existing assets, especially multifamily.
- Asset Price Adjustments:
Opportunities emerge as new build costs rise, making existing product more attractive.
- Rising Distress:
If today’s tariffs push us closer to a downturn, expect defaults to climb above the $38B CMBS delinquency seen in late 2024.
- Geographic Shifts:
Markets near the U.S.-Mexico border may benefit as manufacturing flows shift south - ironically, even as trade friction increases.
Long-Term Impacts (3+ Years)
Broader Economic Effects
- Structural Economic Shifts:
The U.S. economy may settle into a new normal that is 0.3–0.6% smaller than it otherwise would have been.
- Manufacturing Reshoring:
Tariffs may eventually add 400,000 U.S. jobs, particularly in industrial heartland states.
- Supply Chain Reorganization:
Domestic production gets a boost, but at the cost of higher consumer prices and tighter supply chains.
Direct CRE Impacts
- Industrial Demand Growth:
Expect a long-term tailwind for industrial real estate, factories, warehouses, logistics.
- Geographic Redistribution:
Smaller cities with lower land costs may benefit most from reshoring.
- Asset Value Appreciation:
As replacement costs rise, rents and values of existing assets could climb.
- Sector-Specific Opportunities:
The most patient and well-capitalized buyers, those willing to step into the chaos, stand to gain the most.
Conclusion
Trump’s latest tariff salvo changes the calculus for CRE investors.
In the short term, rising costs and market uncertainty will hinder activity. The medium term may bring distress-driven opportunities. Long-term, reshoring and higher domestic production may fuel new demand, particularly in the industrial sector.
For sponsors and investors, that means:
- Focus on Existing Assets – Lower risk, quicker path to returns.
- Build in Cost Buffers – Material costs are only going up.
- Target Reshoring Markets – Bet on future demand where goods will be made.
- Prepare for Distress – Liquidity will be king.
- Shift Toward Industrial – The most obvious beneficiary of this policy regime.
While today’s Rose Garden announcement may cause additional market turbulence, it also reinforces the notion that change equals opportunity for those positioned to act.
Personally, I’m holding cash (earning 4.5% tax-free), scanning path-of-progress growth markets, and only considering deals with cap rate spreads of 100bps+ over debt.
Curious what you're thinking. Hit reply and let me know.
***
I'm actively looking for CRE investment opportunities with income, accretive debt to cap-rate, and mitigated downside considering all the current market changes. If you'd like to join me, please complete this form, and I’ll be in touch.
Thanks all,
Adam
|
|
|
Sponsored by Cores Real Estate
OPEN FOR INVESTMENT
only 6 spots left
West Oak
Value-Add Multifamily Investment Opportunity
Wake Forest · North Carolina
34 Units
Deal Highlights:
- Last sold for $6.25 million in August 2022
- Prior owner spent $600,000 +/- on improvements.
- Cores purchasing for $5.1 million
- Projected investor 16.2% IRR and 1.95x equity multiple
This offering is almost fully subscribed.
Click here to access more information and offering documents.
|
|
|
Podcast/YouTube Show:
Meet Franklin Spees, IWF
Franklin has worn nearly every hat in real estate - lawyer, planner, broker, manager, investor, and now capital allocator. He’s raised and deployed over $30 million into commercial deals nationwide.
Franklin unpacks the co-GP model, why it’s under growing regulatory pressure, and why fund-of-fund structures are gaining favor. He also shares where new allocators often misstep.
With hands-on experience across the stack, Franklin explains what he looks for in a sponsor, how he secures better terms, and why transparency is critical in today’s market.
Instead of cold calls or ads, Franklin built his investor base through his existing property management and legal clients - people who already trusted him, and he shares why patience and communication matter more than ever, and how seasoned operators will survive the current market turbulence.
Quote:
“There are people that are still not even complying with securities laws, when they invite people in to aggregate money... a large chunk of the people that are venturing together are passive... they've essentially been sold a security and therefore you need an exemption or you need to be regulated directly by the FTC.”
Franklin Spees, IWF
Link to the full episode here >>
|
|
|
***
Connect with me on LinkedIn
Subscribe to my YouTube channel
|
|
|
Please note that I am not an investment advisor or attorney and do not make investment recommendations of any kind. Please seek advice from your financial advisor, accountant, attorney, and any other professional in assessing the risks associated with any investment opportunity, as every opportunity has risks that could result in a substantial loss.
If you no longer wish to receive any of our emails [gasp], please click this link: Unsubscribe or here to Update your profile | Dr. Adam Gower 324 S Beverly Drive, Suite 501, Beverly Hills, CA 90212
|
|
|