As we move toward 2025, the return of Donald J. Trump to the presidency brings questions about how his policies could influence the commercial real estate (CRE) market. While his first term provides insights, let’s focus on realistic projections and how investors can prepare for likely outcomes.
1. Reshoring to Bolster Industrial Real Estate
When Trump resumes office, it’s highly likely to see a renewed focus on tariffs and reshoring policies. These will incentivize certain manufacturers to bring production back to the U.S., driving demand for industrial, manufacturing facilities as well as office to a lesser degree. Regions with robust infrastructure, like the Midwest and Southeast, are likely to see the greatest growth.
Projection: The industrial sector will remain a star performer, with new developments focused on logistics hubs and manufacturing clusters. Investors targeting industrial properties in areas with strong transportation networks will likely see rising demand and rental rates.
2. Onshoring to Expand Employment and Retail Opportunities
Trump’s commitment to domestic job creation could translate into policies favoring American labor. Higher wages and increased employment opportunities could invigorate local economies, particularly in regions benefiting from manufacturing growth. If Trump slashes a major cause of 3-years of massive inflation, the Fed Govt spending, then disposable incomes should soar and so will demand for retail, hospitality, and mixed-use developments.
Projection: Secondary and tertiary markets will experience revitalization, with growing demand for retail and residential properties. Retail near well-leased industrial hubs could enjoy renewed attention, especially as consumer spending rises in these revitalized areas.
3. Continued Supply Chain Challenges for Construction
One challenge from Trump’s previous term was delays caused by tariffs on foreign-made construction materials. If similar policies are enacted, the industry will need to adapt to potential supply chain constraints, driving up costs for new construction. CRE developers & investors must account for these potential bottlenecks when planning projects & some are already beginning to stockpile materials in US. With that said, America desperately needs to decouple from its reliance on foreign production of goods so 2025 is the time to rip off the Band Aid and return America to being a production center.
Projection: Investors may increasingly favor value-add opportunities or adaptive reuse projects over ground-up construction, which could be delayed or become cost-prohibitive. Functionally obsolete office, industrial and warehouse buildings could be a target for conversions into mixed-use spaces or specialty facilities.
4. Tax Policy to Encourage CRE Investment
President Trump’s first term introduced creative tax incentives like the Opportunity Zones program, which spurred development in underserved areas. The second Trump presidency could bring an expansion of such programs, offering CRE investors favorable conditions for redevelopment and long-term growth. Also, the threats of eliminating 1031 Exchanges and taxing unrealized capital gains have been eliminated for the next 4 years (and hopefully forever).
Projection: Investors can expect renewed interest in Opportunity Zones and potentially lower personal income & corporate taxes, creating an attractive investment environment for large-scale development. Markets positioned within designated zones will likely see accelerated growth, particularly for multifamily, industrial, and office properties.
5. Infrastructure Spending as a CRE Catalyst
While Trump’s first presidency prioritized eliminating unnecessary bureaucratic regulations and making infrastructure improvements, a second term should amplify these efforts, enhancing highways, railways, and ports critical to supply chains plus new US-based investments like the $100 Billion just announced by SoftBank. Such advancements could directly benefit industrial and logistics-related real estate as well as add a tremendous number of high-paying US-based jobs. Trump, SoftBank CEO announce $100 billion US investment, in echo of 2016 event | Reuters
Projection: Logistics hubs and transportation-linked properties will remain prime investment targets. Additionally, enhanced infrastructure could open opportunities in previously overlooked regions, spurring growth in nearby CRE markets.
Preparing for the Future: Key Takeaways for Investors
As the current administration’s harmful policies are eliminated and pro-growth policies are instituted, proactive investors should align their strategies with these trends. Here’s what to focus on:
- Industrial Real Estate: High-demand areas near ports, railways, and interstates with growing populations will offer strong long-term returns.
- Opportunity Zones: Reassess your portfolio for properties in eligible areas to capitalize on potential tax benefits.
- Value-Add Properties: With the #ReturnToOffice movement gainly ground & construction materials potentially delayed or costly, renovating older existing office properties will be an opportunity for those not interested in risks associated with new developments.
- Geographic Diversification: Secondary markets in manufacturing-friendly & low/no income tax states like Texas, Ohio, and Tennessee will likely see strong growth.
- Stay Agile: Legislative changes may create new opportunities or challenges—working with a knowledgeable CRE professional will be critical.
Whether you’re navigating a 1031 Exchange or considering a new investment, these trends offer key insights into the CRE landscape. As we near 2025, let’s strategize on how to align your portfolio with these emerging opportunities and secure strong long-term investment returns.
