CRE investors are keeping a close eye on Trump’s impact on commercial real estate as Republicans take back control of both the White House and Congress.
With the current president’s real estate background and strong branding presence in high-end CRE development, the industry is watching carefully to see how his second-term priorities could shape the market.
Many business leaders expect more business-friendly CRE investment strategies under Trump, with fewer regulations that might boost growth. This could provide short-term advantages to CRE.
But there’s another side to the equation — higher interest rates that are already challenging for the sector could persist depending on how the administration’s policies affect inflation and broader economic conditions.
The economic impact of Trump’s policies on CRE
Job growth and unemployment rates
The US economy added 151,000 jobs in February 2025, which is slightly below the anticipated 160,000 to 170,000.
Sectors such as healthcare (+52,000 jobs), financial activities (+21,000), and transportation and warehousing (+17,800) experienced notable growth.
However, federal government employment declined by 10,000 positions, and the unemployment rate edged up to 4.1% from January’s 4.0%.
The uptick in financial activities expected from job growth in certain sectors may increase demand for office spaces, and the modest rise in employment may also boost consumer spending to benefit retail locations.
However, there is always a risk that the decrease in labor force participation to 62.4% may temper this optimism.
Inflation and interest rates
The Personal Consumption Expenditures price index rose by 0.3% in February 2025 to mark a 2.5% year-over-year increase.
Core PCE inflation (excluding food and energy) notably climbed by 0.4% for the month and 2.8% over the year. These inflationary pressures have implications for interest rates.
The Fed maintained interest rates between 4.25% and 4.5% in its March meeting but acknowledged the possibility of two rate cuts later in 2025.
The 10-year Treasury yield stood at 4.59% on March 28, 2025, reflecting market apprehensions about persistent inflation.
Because elevated interest rates increase borrowing costs for CRE investors, these trends may slow down acquisition and development activities.
Investor confidence and stock market trends
Major indices declined in February this year, with the S&P 500 down 1.97% and the Nasdaq falling 2.70% on March 28, 2025 amid inflation concerns.
These stock market fluctuations may lead CRE investors to reassess their portfolios and potentially shift towards more stable assets.
Sector-specific impact on CRE
Different CRE sectors will feel the effects of Trump’s presidency in different ways, depending on the direction of key policies and economic signals.
Office market: Policy outcomes could swing corporate leasing decisions
National office vacancy rates remain elevated at over 19% in Q1 2025, according to CBRE, with subleasing trends still rising in some metro areas.
If the administration follows through on promised tax cuts and reduces compliance burdens, companies may find themselves with stronger bottom lines, and there may be renewed leasing in urban centers and suburban office parks.
Industrial and logistics: Reshoring could fuel demand
CBRE’s Q4 2024 report indicates that the overall industrial vacancy rate increased to 6.0%, which is by far the highest since Q1 2015.
CommercialEdge’s February 2025 report notes that the national industrial vacancy rate reached 8.2%, reflecting a 20 basis point increase from the previous month.
But things may change. Trump’s protectionist measures and import tariffs may force companies to start reshoring and diversifying suppliers to avoid disruptions.
This trend may support increased demand for logistics hubs and distribution centers, especially in inland locations with strong transportation infrastructure.
However, retaliatory tariffs from trade partners could dampen cross-border commerce and reduce import/export volumes, affecting trade-dependent logistics markets.
Demand for industrial space could also potentially surge if Trump’s administration moves forward with manufacturing-focused tax incentives or infrastructure investment.
The 2025 Made in America initiative (which is already in the early proposal stages) could fuel long-term demand for factories, supply depots, and last-mile fulfillment centers.
Retail sector: Consumer behavior will affect trajectory
Tax cuts could put more cash into consumers’ hands and potentially boost spending, but it’s not yet clear how much of that extra income will go to physical stores versus online shopping.
Fulfillment centers and last-mile logistics may see more activity if the administration reduces regulatory constraints on online commerce or cross-border trade.
Multifamily and affordable housing: Incentives and costs
Any changes the administration makes to tax credit programs such as the Low-Income Housing Tax Credit could influence how many multifamily units get built in the coming years.
So far in 2025, multifamily construction starts have slowed down 11% year-over-year, with developers citing high interest rates, high material costs, and local permitting issues as the main issues.
Higher interest rates will also make it harder for multifamily CRE investors to secure favorable financing, and this can lead to rent increases or deferred maintenance.
Potential risks & uncertainties for CRE Investors
1. International relations and foreign investment
Foreign capital has long played a key role in CRE especially in major markets like New York and Miami.
But the Trump administration’s aggressive trade measures and protectionist stance may cause foreign investors to pull back.
Restricting foreign ownership and tightening capital controls could also reduce capital inflows even further and negatively affect property values and liquidity in trophy assets or urban gateway markets that traditionally attract international buyers.
2. Interest rate decisions
The Federal Reserve’s decisions are closely tied to the administration’s economic actions.
If Trump’s policies fuel inflation, the Fed may feel pressure to raise rates more aggressively.
Rising interest rates will slow refinancing activity and compress yields, and if inflation proves more persistent, CRE investors will need to account for reduced loan availability and higher debt service ratios.
Conclusion
The Trump administration’s tax relief and reshoring agenda may benefit industrial and office spaces linked to domestic manufacturing or expansion, but inflation risks (combined with the prospect of long-term elevated interest rates) continue to create new headwinds for CRE investors.
To stay ahead, investors should:
- Watch economic indicators and Fed announcements
- Stress-test current investments under higher rate scenarios
- Revisit financing terms to ensure flexibility amid volatility
- Diversify holdings across sectors and geographic markets to hedge exposure
It’s also important to step back and look at things from a longer-term perspective.
Remember that CRE is a long-term play, and that while presidential policies can affect dynamics in the short term, their influence tends to fade over time as markets adjust.
We recommend working with trusted advisors — including CRE lenders — who can help you assess policy risks and review your financing strategies before making any major CRE investments.
If you need assistance, schedule a consultation with our team here at Private Capital Investors.
