Tariff Worries Add a Post-election Wrinkle

All of us in the business community deal with uncertainty no matter what condition our local, state and national economies are in. Every business decision we make involves a calculation of risk, but we can mitigate that risk through our level of knowledge about those factors most likely to impact profitability. In a rapidly expanding economy, risk may be minimized by the natural rise in demand for our product or service. We certainly experienced that in the commercial real estate sector after the market bottomed out in 2010. However, after the longest industrial property upcycle in history, the economy experienced a nasty inflation spike starting in 2021, which forced the Fed to raise the cost of capital to put out the fire. That sent industrial property demand sharply lower and flattened pricing growth for both lease and sale product, as a corresponding rise in uncertainty sent buyers and tenants to the sidelines. However, we have yet to experience a full-blown correction in most major submarkets, the Inland Empire being the exception due to high levels of construction. So, when asked, we have been describing current conditions as sluggish, slightly out of sync, but with election uncertainty behind us.

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