Yes, Tariffs Will Hit Commercial Real Estate Hard | Office Hours
In this episode of the Commercial Real Estate Investor Podcast, we’re tackling the tough stuff—how skyrocketing tariffs are about to send shockwaves through the commercial real estate world.
I’m diving into what these new tariffs really mean for industrial, retail, and even office space—and why developers, landlords, and investors alike need to be paying close attention.From the rising cost of construction materials to the ripple effects on tenant stability, I’m breaking down how global trade policy is about to hit us right here at home.
I’ll also share updates on my own portfolio, why I had to fire half my team last week, and what I’m doing to keep the Cauble Group moving forward during this wild economic ride. Plus, we’re talking Reddit threads, community questions, and why your next investment move needs to account for these real-world risks. Let’s get into it.
Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Central: www.crecentral.com
Key Takeaways:
Tariffs will significantly impact commercial real estate, especially industrial and retail sectors, by increasing construction and material costs.
Manufacturing relocation back to the US will take 4-5 years minimum, with full impact potentially taking 10+ years.
Businesses are likely to face immediate price increases due to tariffs, potentially causing economic uncertainty and reduced transactions.
Coastal cities and port-heavy markets may be hit hardest by import/export disruptions.
Opportunities still exist in commercial real estate, particularly in value-add projects involving renovating existing buildings.
Landlords should:
Communicate openly with tenants
Be flexible with lease terms
Prepare for potential vacancies
Focus on long-term strategies
The current economic environment suggests caution, with an emphasis on making steady, conservative investments rather than seeking big wins.
Interest rates may rise to combat inflation caused by tariffs, making current rates attractive for investment.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
Tyler Cauble 0:00
This episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www dot cre central.com to learn more. Welcome back to the commercial real estate investor podcast live from the COVID group Studios here in Nashville, Tennessee. And we are back. We missed last week due to some unforeseen circumstances, which I will definitely fill you guys in on a little bit later. But we are back for office hours. This is where you jump in. You have questions on commercial real estate. We dive into them and have a conversation around them. I charge a lot of money for consulting, and this is your opportunity to get some free advice. So drop in the comments. Let me know what questions you have. Today, we're going to be diving into tariffs and commercial real estate. We've talked about that a couple of times on this channel before, but considering everything that is going on this week and possibly 50% additional tariffs going on to China today, at least, that's what the President is saying. We need to talk about how that's going to impact real estate. The market is crashing. And one, it makes me very grateful to be invested in commercial real estate, considering the state of the market today. But two, it also, as it should any investor, makes me very uncomfortable with where the future could be headed. Because even though commercial real estate can't be tariffed, it's going to be tariffed. And what I mean by that is, yes, obviously commercial real estate is local here to the United States, right? At least the real estate that we deal with. Obviously, every country has its own real estate, and those tariffs won't be directly levied upon commercial real estate, but everything that commercial real estate involves is going to be hit very hard by these tariffs. So let's dive into that today and have a discussion around that. I've got a pretty good thread from Reddit that we'll dive into as well. Jonah is saying, Do you think that we should jump on these lower interest rates? Yes, yes, I do. I think, considering where we're likely headed now with more tariffs, I think that these are the lowest interest rates that we could possibly see for a little while, which is really disheartening to say, because we were really on track. I mean, coming out of the pandemic, the United States had the strongest recovery out of any country in the world. And yes, interest rates were higher than anybody wanted them to be, but they were working, and it was fixing our economy, and things were starting to slow down so that they were speed ups, right? So they were starting to actually drop the interest rates. The problem is, when you Institute something like tariffs and basically increase taxes across the board, you increase the cost of everything, right, which is inflation. And so the only way to start curving a little bit more of the rampant inflation that we could see if we start seeing things like 50% additional tariffs on China is higher interest rates, and the Fed operates independent of any other governmental branch as it should, because it's not a political group whatsoever, at least it shouldn't be. They are strictly there to manage our money and the flow of money throughout this country, in the world, and so they will likely have to raise interest rates again. I'm not Jamie Dimon. I am not Larry Ellison. I'm not some of these guys that have billions of dollars and and, you know, understand economics in a better way than anybody else. I mean, I'm just a commercial real estate investor. So take that with a grain of salt. It's just my opinion, but looking at it from the outside, it seems to me like they're gonna have to raise interest rates. I don't know how else to get around it. So all right, let's catch you guys up on this past week, because it's been a hell of a week for me. We missed last week because I had to have an emergency meeting. We ended up firing my property manager. There was some gross misconduct going on that I had been investigating internally for about two weeks. And I can't say much more than that right now, because there's an ongoing investigation, but I will be getting it back to you guys with that. I ended up having to release three of my brokers this week as well. So it's been an interesting week. Ended up firing over. Half my team and two separate reasons, honestly. So what I'm going to be talking about in an upcoming YouTube video is letting them all go and how I am restructuring my business to move forward without them. Because now that I am. He's saying you can barely hear my mic. I don't know why that is. Let me check on that. Nate one second.
I All right, is that better? Yeah, that's way better. Sorry about that, guys. I don't know why the mic wasn't working, but I just reset it, and hopefully you guys can hear it now. It's at least popping up on my end as being a little bit better. That's one of the tough things about doing these things live, man, sometimes you just can't hear it. But yeah. So So getting into my week, this past week, we fired a property manager for some gross misconduct. There is an ongoing investigation for that, so I will disclose it to you guys a little bit later. I did fire three other brokers as well. So this past week, for two completely separate reasons, I had to fire half my team, and so we'll be recording a YouTube video later today, kind of talking about releasing those people from my team, and what I'm going to be doing with my business moving forward to accommodate this new structure. Looking at it, you know, the three brokers that I had to let go were largely listing agents. And I think that with this new business model I've been tossing around here for quite a bit, I would need to hire three agents to handle that level of business, I would need one leasing assistant. So I am hiring a leasing assistant if you're in Nashville or are willing to relocate to Nashville. It is a very entry level job, right? So it's a $30,000 base plus 10% commissions on the deals that you're closing, but I'm providing you with everything. I'll get you educated. We'll bring you in and give you a path to becoming a full fledged broker on your own as well. So if that's of interest, reach out to me on Instagram and let me know it's at commercial underscore in underscore Nashville, and we can dive into that. But yeah, I mean, I'm pretty excited about that. I mean, it's annoying to have to deal with all of that. Unfortunately, that's just part of owning a business and running a team. Business and running a team, especially in commercial real estate. But, you know, look, when you've got brokers that have been actively talking to your clients about waiving and going and starting their own thing and taking your clients with them, that's not okay to do. It's not and it's it's very short sighted and dumb to be honest with you, because they're my clients. Of course, they're going to call me and say, Hey, by the way, this conversation happened. So yeah, it's it's been a fun week, all of that. Mind you. While I was in Hawaii, Wednesday through Sunday, I flew out to Hawaii. I was there for the entrepreneurs organizations global conference, which is pretty cool. I'm on the board this year. I've been on the board for a few years now, and it was, it was really cool getting out there and learning more about how the entrepreneurs organization works and what other chapters across the world are doing? You know, Nashville has the largest chapter in the country. I think we're third, second or third in the world, which is pretty neat to see. We've got a lot of entrepreneurs here, and a lot of people that are, they're working together to make things happen. So pretty cool to do that, but also not very fun having to deal with all of this while I'm basically in another country, right? Hawaii is so isolated from the mainland, and it's also a five hour time difference from Nashville. So that was, that was a bit brutal, for sure. But let's dive into this Reddit article. I think this is pretty interesting, well, and when I say article, I mean more of a forum. You know, this came up five days ago. I'm curious to see if there's additional comments since then, because five days ago was very different. But this one goes specifically on to industrial. And, you know, industrial is industrial and retail are the two that are most likely to get hit the hardest out of any type of commercial real estate I'll work to give in some of my additional insights on that as well. But this, you know, the question is, how do you see tariffs affecting the commercial real estate market for industrial property leases? It seems businesses import products from overseas to store large warehouses for distribution. Do you see tariffs affecting the. In for storage space. I will say, when I was at in Hawaii for the conference, ended up chatting with a couple of guys that had e commerce businesses, and most, almost all the goods that they sell are not manufactured in the United States whatsoever. They're all manufactured in China. I don't know if they're manufactured anywhere else in the world, but it was for sure they are not manufactured in the United States. The tariffs are essentially killing their businesses, which is kind of wild to see, especially if a new tariff goes in today, which I think would bring it up to 104% tariffs on Chinese imported goods, which is crazy. That means if you buy a pair of shoes for $100 from China, you have to pay $104 in taxes on that, right? And that's just for the import. So anyway, first comment is saying, industrial is not my sector, but I think this will have a substantial impact on new construction, because the cost of material will be substantial over the long term. It could help prompt more manufacturing in the US, but those projects take many years, so that benefit will not be recognized until we have years of pain in between. If this was the road to go down, I really wish they had been phased in over a four year time horizon to allow businesses to adjust and adjust their supply chain and infrastructure. I mean, here's the thing, could you, I mean, like, there's, there's the carrot and the stick approach, right? The carrot is, hey, we're going to give you all of these benefits if you decide to move manufacturing to the United States, and the stick is, we're going to punish you if you don't move manufacturing to the United States. Unfortunately, the stick approach is being used, and it's also impacting everyone, not just these manufacturing companies. And you know, the president likes to say that we'll see, you know, major changes in the United States in manufacturing the next one to two years, that is not going to happen at all. Maybe three years, probably more likely four to five years before we start to see any difference whatsoever. Because just because you say move manufacturing back to the United States doesn't mean it's going to happen that quickly. You have to think most municipalities like on the front end, most municipalities don't want manufacturing within their locale. They don't it's loud, it's messy, it causes a lot of heavy traffic. There's a reason as to why it was so easy for us to move it to another country that was was fine with that, and so at a bare minimum, you're likely going to have to go find a piece of land that's on the outskirts, get it rezoned, or something like that, right to work with the local officials there. That takes a lot of time. Takes a lot of time, let alone the fact, you know, don't, don't mind the fact that you also have to go somewhere where you have enough of a population there that you can hire to go work in those factories, right? Which, hey, I guess, if you're firing a bunch of government workers for no reason whatsoever, and, you know, causing small businesses to shut down their doors, I guess there's gonna be plenty of people to hire. That's a whole different story. So assuming that all of those things come together perfectly. It's probably going to take you nine to 15 or even 18 months just to find the land, go through the due diligence process and then close on the property, right? So there you're at almost two years right off the bat, and this is that's not uncommon, like if you're buying a regular piece of commercial real estate, and you're coming in and you are rezoning a piece of dirt, or you're just buying land and you want to build something on it, you want to make sure that you're going through the due diligence process properly, and that you are putting all of your plans together, and so you can pull permits, so that as soon as you close on that land, You can start construction. Anybody that's remotely sophisticated is doing it that way, unless you're getting such a good deal that it's worth closing earlier, right? But that's typically how development works. So we're 18 months in right there. Right from that point to build a facility like this, it takes nine months to build a house, maybe even 12 months to build a house, assuming you've got the permits to build a manufacturing facility like this, is going to take you 18 to 24 months, maybe even longer, depending on how specialized the manufacturing is, right? Because once you get the building and all of the infrastructure put into place, you still have to deal with all of the specialized equipment and placing of all of that, right? These are highly specialized buildings because they are built specifically to accommodate that type of manufacturing. Now there are, of course, there are some like assembly facilities that can be very easily retrofitted into other types of uses, but there's some manufacturing. Where, if that tenant leaves, there's no way that you could really backfill it without ripping everything out and starting over. That's why I don't typically recommend manufacturing for newer commercial real estate investors. It just doesn't make sense. It's a very
it's very specialized. You got to have the right kind of knowledge around all that, to be honest with you. So anyway, it's gonna take four to five years, probably just to start seeing the manufacturing again. That's just getting to the point where we have the manufacturing the United States. Will it be cheaper than China? Well, yeah, if we have 104% tariffs, of course it will. We have stricter labor laws. We have what I mean, the the cost of living in the United States compared to the cost of living in China is significantly higher, which means that in order to find any sort of labor that's willing to work in a manufacturing facility, you have to pay them more. And I'm all for paying people more money. The problem is that's going to increase the cost of the end good, right? I mean, that's, that's, it's, it's one plus one equals two. So if manufacturing costs go up, the price of the good goes up. And so it's, it's pretty much always going to be cheaper to do it in China and to into, you know, bring it in here. So I just don't see how, in four to five years, even if we bring, even if we're able to bring 100% of our manufacturing back to the United States, we still don't have all the raw materials that are necessary to make this happen, which means that you're still gonna be paying tariffs to import all of those goods. So this will never fully go away. That's why tariffs don't make sense, and it's and it's going to impact commercial real estate across the board. If you already own buildings, it could help you, because we're going to see so much inflation, at least you have a hard asset that's just going to go up in value. I mean, that's that's kind of the name of the game right now, even if it was phased in over four years, though, I still don't see it really being all that beneficial. Let's see another comment is saying what business is investing heavily in the US. When the President can use his big black Sharpie and undo everything on a whim, they'll just hike prices and wait till someone sane is back at the helm. I think that that's a pretty good point. You know, look at like, was it land rover that announced this past week that they're going to stop all imports into the United States until they figure out their new business model. I don't think that that is going to be an uncommon move for a lot of businesses for the foreseeable future. Now, that's not to say that they're stopping everything indefinitely, but, you know, I mean, there was a guy I was talking to who when he put his goods on a ship in early March from China to the United States, he knew that he was going to be paying a 25% tariff by the time that that those goods reach the United States, which they don't show up overnight, by the time that those reach the US, he's going to be paying over 50% in tariffs, which means that, you know now he's got to either eat that cost or he's going to raise his prices significantly, and those prices will get raised. So, yeah, I don't know if I was in retail or manufacturing right now any sort of goods, I'd be very, very worried about where we're headed. Let's see this person's saying tariffs will impact everybody. The burden is, in a general sense, will be on consumers and businesses. Those increased prices will mean they will have less money to spend on other things and services, which will in turn slow economic growth in a more direct route. It will make new construction far more expensive, which will be rough for any new development. I mean, it's true. I mean, look at the United States. Lumber supply like 80 or 90% comes from Canada, and for whatever reason, we've decided we want to attack Canada too. It makes zero sense to be implementing these tariffs when we don't have the natural resources locally here in the United States to sustain ourselves, manufacturing tends to require specialized equipment and location relative to source material and to distribute into distributors and customers, is going to be critical. But again, demand will be tamped down by the general economic reality. There will probably be some substantial growth in some industries, in some locations that benefit from this in a decade plus time frame. But just to get these projects off the ground as a multi year process until they hit everyone is going to be hurting. And if everyone is hurting, who is investing billions in multi year projects when there is so much uncertainty because the head of the government is waffling back and forth like a grandma with dementia and a rocking chair, that's pretty funny. Yeah. I mean, look, people don't like to make massive, massive investments when there's so much economic uncertainty out there, right? And so, you know, we've worked with these groups before. When you're coming into a municipality, call it Nashville, because Nashville has done a phenomenal job at attracting massive companies. We've got, you know, Amazon with six. 7000 jobs. You've got Ernst and Young with 1500 you've got Alliance burns team with a bunch. I mean, Alliance relocated off of Wall Street, right? Got some pretty big companies that have moved to Nashville. It's because Nashville is such a certain economic bet, because of the massive population growth here, and because of the local politics and the state politics that these companies all feel pretty comfortable moving to the United States or or moving to Nashville when, when you create economic uncertainty across the United States and really across the world, who wants to go and invest billions of dollars not knowing Will, Will tariffs increase tomorrow? Will you know what's going to be the next move that this government makes? It could negatively impact my business and nobody. I mean, most people are not willing to take a bet like that. So, I mean, I wouldn't, would you? I mean, if you had a billion dollars, would you go and invest it in making, in building, manufacturing today, when you know, somebody could come in tomorrow and say, Actually, we're gonna not do this now, because now he's also talking about getting rid of tariffs, or a parent. I don't know who knows what's even real anymore, but if they get rid of the tariffs, then why'd you just invest all these billions in manufacturing locally? Because now you now you can't compete. So it becomes this, like you're damned if you do. You're damned if you don't. Type of scenario, tariffs will affect everything. Space is still required, but the company who needs it may be different, as in rather than the importing company, and exporters suddenly may find they can't move their products until they find domestic buyers. Production will also slow down as increased costs will decrease sales, therefore demand. Lots of things will happen this funny. You know what won't happen in the meantime, transactions. Nobody I've talked to, tenant, landlord, investor, nobody knows what the hell is going on and what new, disruptive policies are just around the corner. There's no confidence in what happens next. So most people seem to be hiding, holding the cards that they already have, waiting for some stability so they can make an informed decision. It's tough. I mean, you look at you look at the stock market. The past few days, it is the steepest decline that we have seen in the stock market since the Great Depression. Think about that for a second. Almost 100 years, we haven't seen the stock market decrease like it has again. One of the reasons I'm grateful on the real estate because at least I don't have somebody sending me a ticker every 30 minutes saying, Hey, your property has gone down in value, has it? Ah, likely. I mean buying power has gone down, which means real estate values across the board have gone down. But that doesn't mean that I have to sell, or that I'm going to panic sell, or any of that kind of stuff, because I can just sit on it, write it out, collect ran right now we are having to work with some tenants. I mean, you know, I've got probably 130 or 150 tenants here in Nashville, and it's a good microcosm of what's going on. And, you know, we have some tenants that have reached out that are having some issues with their business, and so we're having to work with them on the rent. You know, I'd rather work with them now than to force them to keep me, keep paying me as much as they can, until they have to close their doors, and then I gotta go find somebody else, you know? I mean, that's that seems to me to be the name of the day, the name of the game today. Man, I can't talk today. Welcome back from Hawaii. Just so you all know that's, if you've never been to Hawaii, that is a that is a hall. It was we flew to Atlanta on the way out there. It was an 11 hour flight from Atlanta, 11 hours on a plane. I don't like flying, so imagine just sitting on a plane for 11 hours, and you don't even want to be there coming back was was somehow actually worse, because we stopped in LA, which was, you know, five hours from Hawaii to LA, and then it was four hours from LA to Nashville. But the problem is, at least when you go on the 11 hour flight, you're on a much bigger plane. You have more space coming back from Hawaii to LA and then LA to Nashville, you're on a smaller plane. I just I could not sleep. I couldn't get comfortable. So if I am a little bit spacey today, that is why. Let's get to some of y'all questions real quick before we get back to it. Let's see here. Pull this all up. Uh,
Colin is saying closing on land next Tuesday, and for my civils in the GC, the development isn't happening for the time being because of tariffs. How soon or do we even see other developers come to complete stall due to the tariffs? Uh, Colin, I have a pretty good feeling that you're that it we're standing on the edge of the cliff, if we haven't fallen off already, to be completely honest. And I really don't want to feel, I don't want to sound like Chicken Little I know that that's, you know, not the most fun thing to jump on a podcast or onto the YouTube channel for commercial real estate. In here you. Going to be opportunities in all of this. So that's not to say that. You know the whole world is doom and gloom now, but I just don't see how some of these entities are going to be able to start development and construction moving forward, at least for the foreseeable future, we're still building a 350 unit self storage facility because I locked in my steel prices two months ago, right? So I don't have to worry about any of that, right? Not my problem. But you know, anybody that's starting something new today that's gonna have to pay today's prices? I mean, here's the thing, like back in COVID, I don't know if any of y'all remember this back during COVID, when you were working in construction, the contractors bids like typically, when you get a construction bid, they say, Oh, this bid is good for 30 days. This bid is good for 60 days, whatever. Back then they would just say, this bid is an estimate, true price to be determined once materials are ordered, right? And that's kind of brutal, because you couldn't lock in your pricing whatsoever until you actually locked in your pricing right. You couldn't, you had zero certainty as to what that was going to be. And so, you know, I think that we're going to be heading back towards that, you know, with the tariffs, the way that they are, will they be implemented tomorrow? Will they be implemented next week? Who knows? There's enough uncertainty out there to where people aren't going to feel comfortable walking in any sort of pricing. And so because of that, I think it's going to be difficult for developers, unless you're just really willing to take the risk, and you've got enough of a cushion in your budgets to say, you know, what? If things go over my budget, we're fine. You're probably going to not not do any projects, or at least not any big ones. Carl is saying, What about investment in sober living homes? I think, considering where the economy is today, investment in sober living homes is probably going to be a pretty good investment. There's going to be a lot of people that are drinking after they see what the stock market is doing. Nate is saying, Trump is a four year problem. Long term, businesses aren't going to relocate manufacturing for a four year problem. They will keep their eye 10 to 20 years down the road, and they aren't going to change. I think that's a pretty good take Nate. I mean, look, if I'm in business and I'm dealing with Trump, I'm going to look at and say, All right, well, we only have four years and nine or three years and nine months to go. Right? Why would you invest billions when you know the next president will hopefully be a little more sane when it comes to economic policy? I mean literally taking politics out of it. We don't talk politics on this show. This is, you know, crazy. This is crazy for a president to be doing this. All right. Dustin is saying, buddy, I love the educational information about real estate, but you're far too young to be commenting on stuff. You have no experience regarding these tariffs and how political chess works. Dustin, appreciate the feedback. Man, I am definitely not too young to be commenting on stuff. I'm 32 when you're 18, you can go off to war and die for your country. So I believe anybody can go and talk about how the world is impacting, what, how politics are impacting how they are experiencing the world. If you got a problem with it, unsubscribe, because this is not Paul. It's not political. This is 100% going to impact commercial real estate. And I'm sharing that information with you. If you don't think that's educational, that's on you. Victor is saying seller escrow 20k for sewer replacement within 30 days after closing. Any precautions? That's a good question. Victor, let's see seller escrowed 20k for sewer replacement within 30 days after closing. Any precautions? Well, yeah, I mean, why? Why are they escrowing 20k for sewer replacement instead of just doing it, you know, like that's a big red flag to me, if the seller was confident in their $20,000 price, why don't they just go ahead and lock it out and do the work? As a buyer, I would make sure that I would have my own bids in place, that I know exactly what the sewer costs are going to be, because that's that's a big red flag to me, if they're just going to escrow it now, if you guys, like, if that 20k is based on your bid that you got from your contractors, and they're just saying, hey, we'll set that aside and basically reimburse you for that fine. I mean, I would rather actually see it as a seller's credit at closing than just escrowed for 30 days. I guess that's a big one. If they're going to escrow it within 30 days after closing, why can't they escrow it at closing or give it as a credit at closing? That's what I would be looking for. Colin is saying, What are the plans to mitigate harm as a landlord with. Market uncertainty, obviously, communicate with them on their business operations. But is there any other tips to avoid a commercial vacancy? Colin, love that question, man. I mean, first off, the best thing that you could be doing right now, if you're a commercial real estate landlord, is having conversations with your tenants and being very open with them, right? It's just like it was in COVID, there was a lot of uncertainty there. Communication is key when it comes to all of this. The more conversation that you can have with them, the more you guys can be on the same page, the easier it's going to be for you guys to cross any bridge that comes up to me, I don't think, I mean, I don't know. Here's the thing I want to say, like, I don't think there's too much to worry about, but it depends on the type of business that you have, and really what their health is going into this. You know, there's, there's some bad business owners out there, right? Not, not bad people, just they're not good at running and managing a business, and so if they have too much debt right now, or if they're not good at sourcing, you know, goods from other locations, they may not be able to weather the storm, right? And I think that if you can, at least be having those conversations with them to figure out, like, Hey, is your business doing okay? Do you guys need to take less space, you know, so I can cut your rent, let me know, because anything that you can do to kind of at least mitigate the losses is going to make your wife a lot easier. It's gonna make their life a lot easier. And then you can always just go and take either a smaller space to market, or maybe you can start working on pre leasing it right? Like we had a tenant say, hey, I need to be out at the end of April, like I'm just, I'm going to be done by them. And this was back in March, and their lease runs for another two years. And I said, Hey, appreciate the heads up. You know, give us access so we can come in there and just start getting all of our marketing materials together so we can take this to market for lease, and we'll take it from there, right? I'm going to let them out, it's not worth fighting over. If the business is struggling, they're not going to have the money to pay for anything, so why even bother paying attorneys to try and squeeze blood from a turnip? So I think that that is a big thing. I think, you know, look, be, be willing to work with your tenants. You know, there's, there's, there are some people in commercial real estate that say, Hey, look, the contractual agreement that we sign is the contractual agreement that we will uphold. And I fully agree with that, right. It is a legally binding document. But there's, there's the reality of what's on paper, and then there's the reality in the real world. And just because you can enforce something on paper doesn't mean that you necessarily should it. It's probably it may not be in your best interests, depending on where you are. And so I think, you know, be willing to work with tenants within reason. Don't let them take advantage of you. And you know, I mean, look, if you're going to start giving rent concessions, let the tenant know, you know they need to. You've got to put it on the market. Or if you're doing rent concessions now, then they've got to sign a longer term lease, right? Or they've got to put a sign, a personal guarantee for the lease, or whatever that is, right? Figure out whatever's going to work with you. I always look at it as a trade, right? Don't just come in and say, Okay, well, I'll give you this, this and this, just because you need it. It's okay. Well, if I give you 25% off your rent this month or for the next three months, I need to have X, Y or Z, right? Because that at least makes sure that you guys are both getting something out of the trade, right? Colin is saying, How long in your experience have you seen it take for tariffs to impact construction prices once implemented? That's good question. Colin. I mean, fortunately, I haven't seen too many tear I mean, you know, as as what's his name was pointing out as Dustin was pointing out earlier. I'm only 32 I'm not 700 so I haven't seen implemented across the board like this before. However, I have a lot of a lot of friends that own businesses in this space that are that are being impacted directly by the tariffs, and they raised prices overnight,
overnight, and we had a good conversation about that, because they're like, you know, the news is out there saying, Oh, it'll take a while for tariffs to impact your bottom line. And they're like, that's that's not true at all. You know, the second that I have to start paying more for the goods that I am selling is the second that I'm going to have to raise my prices, or else my business doesn't make sense anymore. You know, most, most businesses don't operate on 50% plus margins, right? And looks like Dustin gave us a thumbs down. Sorry buddy. Didn't mean to, didn't mean to piss you off. So at. You know, most businesses don't operate on 50% plus margins, right? They're 10 to 20% and so if all of a sudden you have these bigger tariffs coming in and taxes and costs of doing business, you have to raise your prices, otherwise you're not going to be able to withhold that margin. And the thing is, like, you know, prices, if you have a 25% tariff, your price isn't just gonna go up 25% right? Your price is probably going to go up more than that, because that business has to maintain the margin, right? So it's not just $1 value. It's not just $1 value, like on a percentage basis. It's them saying, Okay, well, if I want to maintain a 20% margin, then and I have a 25% tariff, I have to raise my prices for 50% 60% whatever that is, in order to maintain the same 20% margin on my cost of goods sold. So I think that they're gonna go up immediately. We've already started seeing that. You know, some of the reason you may not be seeing it yet is because a lot of some some companies, like lumber companies or steel companies, saw this on the horizon, and so they started buying up a bunch of additional lumber, steel goods, whatever, and just stockpiling them, right? So they can buy it at a cheaper price before all of this goes into effect. So you know, again, this may not be across the board. This is one man's experience, but from all of my friends that are running businesses that are actively dealing with this kind of stuff, those costs are going up immediately. So keep an eye on pricing at Walmart. That'll be very interesting to see. Right? I mean, almost everything at Walmart comes from China and so and Walmart's entire business model is predicated on being affordable. Now, to be fair, all of these tariffs on China will impact every single business. So maybe Walmart will still be the affordable one of the bunch. But, you know, it's funny. We were talking about how Walmart is going to become Target. Target is going to become Nordstrom. Nordstrom is going to become Louis Vuitton. The prices are just going to go up so much across the board that, you know, Walmart is going to be the place where everybody shops, I don't know, but it's still going to be expensive. Calling this thing, from a business operation standpoint, and straight, not straight, real estate, what are your concerns for the cobble group, and what are you doing to address them? It's a good question. So from a business operations perspective. I mean, it's like, we're a professional service, right? Like, as as as real estate brokers, as commercial real estate brokers, we handle a lot of leasing and sales at the cobble group. That's what that company does. So from that perspective, I'm not too worried. Like it doesn't really impact our operations, other than it's guys, it's getting back to the fundamentals. Make the phone calls, knock on doors, solve problems. That's all commercial real estate brokers do at the end of the day, knock on doors and solve problems. And you know, there's going to be a lot of problems to be solved, and which means that there's a lot of opportunity as a commercial real estate brokerage coming up, right? There's going to be some companies that are shutting their doors because they can no longer be in business. There's going to be some companies that will thrive in a tariff rich environment, and they're going to want to lease space or buy space. So in terms of, like, our actual operations, nothing is really changing other than kind of what I mentioned earlier, like I'm looking at firing those three brokers and bring some more of that back onto my plate. And honestly, using AI and more tech to enable it, I won't have to hire three brokers again. Maybe I'll hire a leasing assistant instead. So I think that's the big thing. But again, we're professional services. I don't think that there's gonna be as many transactions this year now, which is really, really disheartening. We were looking at this year. We were like, man, it's we're finally gonna start to raise back up. Everybody's gonna feel a little bit good again about commercial real estate. But it doesn't seem necessarily that that'll be the case. But, I mean, here's the thing, the show must go on. There will still be people who have loans that come due, there will still be people that retire, there will still be people that start a business. And so, you know, it's, there's, there's so many transactions that have to happen, regardless of the economy that you know, as long as we're the guys that are continuing to be out there and gals doing the great work and being informed and being knowledgeable the market, I think will do just fine. Game Masters saying tariffs will affect my business, since what I sell is printed in other countries. Pokemon, yeah. I mean, there's so many little things you don't think about that that will get impacted by this, right? I mean, look at that. You know? How much are Pokemon cards gonna cost now, right? I mean, it's from from Pokemon cards to to vehicles. It doesn't matter. The United States imports a lot of goods, a lot of goods, and probably some stuff you don't even think about, you know, I mean, how this hat I'm probably wearing probably imported. I wonder if some of the ink that I've got my tattoos is probably imported. You know, there's a lot of goods that I'm looking around in here. I'm like, that's probably all imported. My camera is a cannon. I don't think that's manufactured in the United States. This microphone, sure, SM, 7b i would imagine that is probably not manufactured in the United States. My TV definitely isn't. So it'll be interesting. And you know the thing like, what people keep saying is like, oh, we'll just buy American. Okay, well, yeah, where am I gonna buy Pokemon cards that are made in America? What about coffee? I'm pretty sure there's, like, zero coffee grown in the United States. So how do you buy that American? It's gonna impact retail. I mean, look again, I know that there's probably some people listening to this that are thinking, Oh, this is a bit more of a political slant to this episode than we typically have. And that's fair, right? I mean, I think once you get into tariffs and what the President's actions are, it's gonna cross the threshold, you know, like with Dustin, it's gonna piss some people off. It just kind of is what it is. And I understand that, and I fully appreciate that. And you know, it's I'm walking a fine line, because I'm not a political commentator, and I'm not going to pretend to be. I'm not super knowledgeable in that space whatsoever. I'm just here to talk about commercial real estate, and it will impact industrial, it will impact retail. It'll probably impact office in the sense that either it's going to be more expensive to build, or those professional services companies might see slower business. So prepare for that. You may have tenants that are not able to afford rent. You may have tenants that just decide, You know what, this space is going to be fine for another couple years. I'm not going to move and expand and grow and so that's those are all things that you just want, need to be aware of, right? Like it's, it's not always happy in commercial real estate. It's always fun and but, but that's, that's what being an investor is, that's what being a business owner is. You have to know what the risks are, what the downsides are, what the negative side of commercial real estate could be, so that you can protect yourself. I'm telling you all of this so that you know it, you're aware of how it could impact you and what you're looking to buy or what you currently own, so that you can at least start to prepare for what may come. I hope none of it happens. I hope all of the tariffs go away. I hope that everybody walks away happy and we're like, Man, how funny was that for a quarter, right? It'd be amazing, but it's, it's better to be prepared and not have to go through any of that than it is to just go into it blindly. In my opinion, Rebo is saying, Do you see the tariffs affecting certain markets more than others from an investment standpoint? Oh, that's a good question. I mean, yes. I mean, look, I think markets that are heavily dependent upon imports and exports are probably going to get hit pretty hard. I'm not an import export like expert by any means. Say that five times fast. But I mean, I could see port cities in California, Texas, Florida, you know, the Carolinas, I could see those getting hit hard, because people aren't going to be importing as much, which means that there's probably going to be less work to be doing at the shipyards, which means that there's just, you know, they're either going to have layoffs or, I don't know, I don't know how that would work, to be honest with you, but yeah, I would imagine coastal cities will get hit pretty hard. You know, my girlfriend and I keep joking about this. It's like, Will this be the last avocado that we can afford to buy? Not that we can't afford avocados, but it's like, man, if avocado prices start to skyrocket, you're gonna look at it and go, All right, well, maybe it's not worth buying an avocado today. You know, it's little things like that that I think are going to start to start to catch up
to people. So, I mean, I think the coastal cities probably impacted more than the inner cities, or more centralized cities. I think cities that have been booming with a lot of new construction could get hit pretty hard in the sense that that construction is going to come to a stop very fast. And so, you know, Nashville is probably the top of that list, unfortunately, and that's where I am. It's got a lot of other really good things going for it, so hopefully that doesn't impact it. But look, we've got a lot of older buildings out there that we could go and value add, right? And so maybe this is an opportunity, right? If we're gonna look on the on the bright side, this is an opportunity to get out there and go renovate older buildings, right? It's greener For it's better for the environment. So it's, you know, maybe we can have some historic preservation. If nothing else, it's cheaper, right? Or at least it should be. So maybe that's the opportunity moving forward, is we're just going to have, you know, buildings that are value added, instead of building all this new construction. I mean, there's a lot of vacancy, like, not like, there are a lot of empty buildings that could use a little life. So be interesting to see Game Masters saying, Yeah, Long Beach is expecting a huge drop in its importing. The Port of Long Beach sponsors a lot of business initiatives, yeah. I mean, like the Longshoremen, you know, I don't know how many you're going to need. I mean, here's the thing, I don't know how much tariffs will decrease imports, but I would imagine it's got to decrease it a little bit. And even if it's 10% or 15, maybe 20% decrease in imports, you're going to have to start you're just not going to have as much work. So you're going to have to decrease your workforce, and then you start to think about how that impacts the entire market locally, right? Like just that one thing alone, if you have to decrease the amount of jobs you have at the port, that's X amount of fewer people that have money to now go spend within the local economy. Sorry, hit my microphone getting very animated this morning. So you have fewer people that can now go put money into the economy, and that's just one cycle, right? And so it you can kind of see how it would start to spin down if you get too much of them. Rebo is saying, Do you think that Fed rate cuts are possible, and will that keep some asset prices inflated? Do you think transacting will be more difficult than your term? I mean, I think, you know, look, I'm not Jerome Powell at the Fed, right? And so I think that, I think that Fed rate cuts are certainly possible. I don't see why we would have them, right? Like you typically want to decrease the federal rates. When you want to incentivize a lot of spending, right? There's too much money that's being saved up that nobody is putting to work in the economy. And you want to accelerate that, right? That's, you know, typically leads to, like, the reason that you raise the federal rate is because inflation is a problem. You have too much money circulating within the economy, meaning that, you know, prices just are going up and and what you're trying to do is curb spending so you can slow that down. And so with tariffs going into place, I mean, everything is going up in price, which means inflation, right? So I don't see why we would have Fed rate cuts. I think it's certainly possible, but I personally don't see why we would have any. I do think transacting in the near term will be more difficult, simply because one sellers are not going to probably be willing to take some of the pricing that buyers are willing to pay, right? I mean, look, I'm on both sides. I buy and I sell real estate, and I fully understand that pricing is probably lower than where it was last year or even the year before. That doesn't mean that I'm going to accept a lower price on any of my assets, right? And I think that that that's what makes transacting difficult, even though I, as a buyer, wouldn't pay that price, right? Because that's just the price that I feel that it's worth. I know that it's not that. But I also don't have to sell anything right now. So, you know, I'm not, like, backed into a corner towards, like, Hey, we gotta start selling things. You know, in the next couple years, I will, you know, we've got things coming up in two or three years that we've got to start thinking about. Hopefully by then, the world will be a little bit of a different place. I don't have to worry about it. We can either refinance or just sell them, and we're fine. But yeah, I mean, I think, I think transacting in the near term will definitely be more difficult. It's definitely something that you want to, want to keep in mind, let's get back to this article, because there's a couple of other really interesting points that people make. Let's see this one is saying manufacturing companies are going to see higher raw material prices for the foreseeable future. Three to five years plus, onshoring manufacturing will start very slowly. Take five years to get transit traction, and 10 years plus to make a real difference. When America moved most of their manufacturing to China, 30 years ago, there was a concerted effort by every large manufacturing company in America to do so, and it still took us 20 years to do it. The shareholder pressure to move to the lower cost manufacturing areas was tremendous and unrelenting. During that period of time, there was obviously going to be a big shift in the use of industrial spaces, a lot of manufacturers will simply go out of business because they don't have sufficient margins to absorb a 25% raw material cost increase. I mean, that's another thing, right? Yes, you want manufacturing to come back to the United States, and we kind of talked about this earlier, raw materials are still going up. So even if it's manufactured here, it's more expensive you. So who's going to pay the cost for that in good, right? Like, we all bought things from China because we're like, Okay, well, it's cheap enough, you know, I'm gonna, I'm just gonna start spending more. But if the American consumer now has to pay more for everything, yes, there's still things that they'll have to buy, they'll probably just buy less stuff overall, right? And so these manufacturers may not be able to absorb them, because wages aren't increasing with this, right? Like, that's the big thing. People are still making what they were making 10 years ago, and prices continue to go up, so people just can't afford it, right? Just is what it is. It is not unlike when a tenant with a short time frame left on their below market lease finds out the building is being purchased. Is being purchased and the new landlord is able to raise the rent to market rates, and it puts the tenant out of business. That happens more often than I like to see. That's it's very true. Unfortunately, we're going to see turmoil that is not necessarily bad for industrial brokers, but it is going to be bad for small manufacturing companies. Let's go going to be bad for smaller manufacturing companies. I think it's going to be smaller bad for smaller businesses across the board. But again, on the bright side, there are still opportunities out there for you in commercial real estate. I still think that there will be some good deals on the value add side. I think that, yes, like paint, carpet, adding a couple walls, redoing bathrooms, will still be more expensive than it was before, but at least you're not having to do a full construction overhaul on some of these deals, and you can go and find them and get a good deal on them, you know. I mean, so that's that, to me, is the opportunity today is, what are the existing buildings that I can buy, fix up a little bit, put some tenants in and and make it work right? In economic environments like this, you're not trying to hit home runs if you do great, right? But that's not the goal. The goal is to hit the singles, hit the doubles, and keep it going, right? I mean, I have to tell myself that all the time. You know, I'm going to be doing commercial real estate for probably the next 40 years, 50 years, hopefully I don't need to hit a home run on every single deal today. If I hit a single twice a year for the next 10 years, that will be more than enough to set up the next 234, generations of my family, and so that's the thing to keep in mind. Commercial real estate is a long game. Don't play it for the short term. Good deals in every market. Jim is saying, just have to be able to weather any storm. Weather the storm, that's all it is. Make sure that you're set up for it and that you're going to be able to handle it properly. I'll leave you guys with that. Appreciate. You guys join us here next Tuesday, every Tuesday, most every Tuesday, 8:30am central standard time with your questions around commercial real estate, got deals for us to dive into. Let's look at those. Maybe we can start, you know, sharing some some stuff on screen and diving into what you guys want to talk to a little bit too. Appreciate you guys. We'll see on the next one. 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Commercial real estate isn’t just about riding the wave—it’s about knowing how to stay in the game when the tide turns.
In this no-holds-barred episode of the Commercial Real Estate Investor Podcast, I’m sitting down with Chad and Adam for a raw Brokers Roundtable where we get real about the challenges brokers face in today’s volatile market. We’re talking retail bankruptcies, economic uncertainty, and what it really takes to stay competitive when the pressure is on.