Consumer-driven US CRE sectors bear the brunt of tariffs

We revised our commercial real estate capital growth forecasts down this quarter. We anticipate the pricing correction to extend into 2025 for all sectors except apartments. Over the next five years, capital growth is forecasted to average 1.6%, compared to 2.2% in our March baseline.

At the end of 2024, investor interest and upward capital value momentum pointed to the start of the pricing recovery for industrial and retail. The introduction of tariffs and the uncertainty surrounding them will be a drag on economic growth this year.

We now expect inflation to push higher, real disposable income growth to slow, and consumer spending to be tempered – and outright decline at times – in the near term. These headwinds are anticipated to have an outsize impact on consumer-driven sectors. We project the start of the pricing recoveries for industrial and retail to be delayed until next year.