Tariffs & Trade Tensions: What CRE Investors Should Know

As the U.S. reintroduces and reshapes tariffs on key imported materials in 2025, commercial real estate investors and developers are paying close attention. While tariffs may appear to be a macroeconomic issue, their impact is highly tangible for developers, tenants, and investors operating across Connecticut and the Northeast. At the Ballou Team, we’re seeing firsthand how these trade shifts are influencing costs, timelines, and decision-making. 

Tariffs on construction materials have led to immediate cost increases for steel, HVAC systems, electrical components, solar panels and imported finishes. As noted in CBRE’s 2025 U.S. Real Estate Market Outlook, these inflationary pressures are pushing contractors to raise bids, developers to rethink project scopes, and investors to reassess the viability of ground-up construction. In many cases, development timelines are being extended as key building systems face shipping delays or become more expensive to procure. With already elevated construction costs across the board, tariffs are adding another layer of uncertainty to projects that were already navigating tight margins. 

These pressures are also influencing tenant behavior. Industrial users, particularly those importing goods from Asia, are beginning to shift their warehousing strategies toward domestic supply chain resilience. Some are expanding their logistics footprints in Connecticut to be closer to Northeast ports like New Haven, Bridgeport, or New York.  

In the retail sector, higher inventory and goods costs due to tariffs are causing national brands to rethink expansion plans or delay store openings. According to recent commentary by Crexi, more tenants are factoring tariffs directly into their real estate strategy, prioritizing flexibility, proximity to distribution hubs, and shorter-term lease structures to remain agile. 

WHAT INVESTORS SHOULD WATCH: 

Tariffs introduce a higher level of volatility in underwriting. Rising construction and materials costs can erode the feasibility of development deals or delay value-add projects that require significant CapEx. As a result, we’re seeing increased interest in stabilized assets and existing buildings with strong in-place income, particularly in markets with high barriers to entry like Connecticut. There’s also a growing appreciation for assets with embedded upside in zoning or redevelopment potential, especially those that don’t require immediate construction. The 2025 PWC and CBRE outlooks both point to a “flight to stability,” with investors moving toward simplicity in deal structure, certainty over high-risk and predictability in cash flow. 

At the same time, new federal tax legislation may help offset some of the uncertainty. Passed by the Senate on 1 June 2025, the bill includes key CRE wins, like permanent 100% bonus depreciation, preserved Section 1031 exchanges, and enhanced affordable housing and Opportunity Zone incentives. While it still awaits House approval, the package signals long-term support for real estate investment. For investors, it’s a timely counterbalance to global headwinds, highlighting the value of local expertise in navigating a complex policy landscape. 

HOW THIS PLAYS OUT IN CONNECTICUT: 

As a Northeast market with constrained land, ageing infrastructure, and limited new supply, Connecticut is particularly vulnerable to the cost implications of tariffs. Yet this also creates opportunities: 

• Value-add acquisitions may see renewed interest over ground-up builds.
• Local sourcing and partnerships with domestic manufacturers may become strategic advantages.
• Development control strategies offer flexibility amid macro uncertainty. 

Tariffs may not grab headlines the way interest rates or tech IPOs do, but they are a defining force in today’s commercial real estate environment. Their influence touches everything from development budgets and leasing behavior to investment strategy and risk tolerance.  

At the Ballou Team, we’re seeing clients shift focus from “owning everything” to controlling the right pieces, from air rights and zoning approvals to off-market land plays. It’s not just about buying property. It’s about navigating the complexity that global policies create at the local level.