Opportunity in Uncertainty – April 14, 2025
Pause or no pause, tariff uncertainty remains in the air. John Denton, secretary-general of the International Chamber of Commerce, told the Wall Street Journal the 45 million businesses in 170 countries that he represents would like to know if U.S. tariffs will settle at the 10% “baseline” applied to countries that did not have a trade surplus with the U.S. However, he said, “It’s unlikely we’ll get that level of certainty in 90 days.” Meanwhile, of course, a trade war between China and the U.S. is heating up, with Beijing showing no signs of backing down.
Yet uncertainty and the inaction that may result can represent an opportunity as well—depending on your vantage point. Especially if tariffs higher than the 10% baseline are imposed once the 90-day pause is lifted, “The pace of new construction projects will likely slow as developers once again balance rising raw material costs with borrowing expenses,” said Ermengarde Jabir, director of economic research with Moody’s Analytics. “However, this will benefit existing multifamily investors since single-family housing starts—currently aligned with their long-term monthly average—are likely to decline.”
Lumber price increases “will further exacerbate housing affordability challenges, particularly for households trying to enter the property market,” she said. “These households may rent for longer or shelve the prospect of buying for the time being.”
Accordingly, said Jabir, in a market with constrained supply and stable or growing demand, “apartment rents will rise and vacancy rates will drop, helping absorb much of the excess multifamily inventory completed over the past two years.”
As Connect CRE has reported over the past year, the pace of multifamily construction has been slowing. Not helping matters for developers is the persistence of delays in getting projects underway, a hurdle identified in the latest quarterly survey of apartment construction and development activity by the National Multifamily Housing Council.
Fifty-eight percent of respondents to the NMHC survey released in late March reported experiencing construction delays over the past three months, falling from 78% in December although slightly higher than the 52% of respondents who reported delays six months ago. The most frequently cited causes for delays in starts over the past three months were economic uncertainty and economic feasibility, both at 68% of respondents (up from 42% and 58%, respectively, in December 2024).
“The March findings make it clear that while we are witnessing some market improvements, rental housing providers continue to face real challenges when it comes to the construction of new communities,” said NMHC President Sharon Wilson Géno. “Economic uncertainty, high interest rates, rising insurance costs and increasing construction costs all continue to make the building of badly needed housing challenging or even impossible. In order to ensure we can build the housing America needs, policymakers should consider the impact any proposed policy changes could have on the housing market.”
The long-term contribution that tariffs make in pushing up construction costs remains to be seen. Meanwhile, though, Jabir predicted that household spending on non-essential goods will likely decline “as higher prices for essentials like food and energy cut into discretionary budgets.
“This trend will be particularly evident in the retail and industrial sectors, as suppressed demand for non-essential goods prompts both traditional brick-and-mortar and e-commerce merchants to rethink their space needs.”
Due to inventory management systems being reconfigured, there’s the possibility of a weaker demand landscape for industrial space, said Jabir. “However, opportunities will likely remain strong for cold storage warehousing, distribution, and grocery-anchored retail—properties with demand tied to food-related essentials.”