By Jerry Fennelly, Fennelly Associates
The conversation around tariffs and commercial real estate has focused almost entirely on costs: construction materials, supply chain disruption, and industrial demand. Those things are real. However, they’re not the most consequential thing tariff uncertainty is doing to the market right now.
The most consequential thing is this: it’s causing companies to freeze. Frozen decisions have a cost that doesn’t show up anywhere until it’s too late to address it.
What the data shows
The numbers are significant. According to NAIOP’s Industrial Space Demand Forecast, only 27 million square feet of industrial space was absorbed in the first half of 2025, with demand actually shrinking by 11.3 million square feet in Q2. The first quarterly decline since 2010 and shifting tariff policies are cited as a primary driver.
Tariff-driven uncertainty has pushed many occupiers toward lease renewals rather than expansions or relocations, as companies wait for clarity that may not arrive on any predictable schedule. The same analysis found construction costs for commercial projects could increase by approximately 5% under current tariff conditions which has already caused some developers to pause new projects entirely.
What’s visible in the market data reflects something even more consequential that doesn’t appear in the numbers: a widespread deferral of real estate decisions by companies waiting for the macro picture to stabilize before they act.
The hidden cost of waiting
Waiting for certainty sounds like a prudent move. In practice, it carries real costs that only become visible in hindsight.
Space you needed but couldn’t secure because you waited, and then the right window closed. Lease terms that would have been favorable six months earlier, when the landlord was in a different position. Flexibility you negotiated away when you finally moved under pressure, because your timeline had collapsed. These aren’t hypothetical risks, but patterns I’ve watched repeat across every uncertain cycle in 40 years of this market.
J.P. Morgan’s commercial banking research noted that tariff and trade policy uncertainty “upended” nascent recovery in parts of the market, as tenants and investors delayed decisions waiting for clarity. The challenge is that the clarity window doesn’t announce itself. By the time conditions feel certain enough to act, the favorable positions are often already gone.
What smart navigation looks like in uncertain terrain
The companies I’ve watched navigate uncertain cycles well across multiple recessions, rate shocks, and disruptions over four decades, share one characteristic. They don’t wait for perfect conditions. They make good decisions with the information available, build flexibility into the structure wherever possible, and stay ahead of the terrain rather than reacting to it.
That means approaching a lease negotiation now with structure built for adaptability: term flexibility, expansion or contraction options, landlord concessions secured while the motivation is there. It means being honest about whether your current space actually serves your operational needs, or whether inertia is masquerading as strategy. It means understanding that renewing a lease out of convenience and renewing it from a position of informed choice are very different outcomes.
Certainty is not a prerequisite for a good real estate decision. Periods of uncertainty can actually create favorable pricing opportunities for occupiers and investors willing to move while others are frozen.
The terrain is always uncertain. The guide shouldn’t be.
I’ve been in this market through conditions that would be unrecognizable to anyone who’s only been in it for five or ten years. Markets recover, trade environments shift, and supply chains adjust. What separates the companies that come out of uncertain periods well from the ones that don’t isn’t access to better data. It’s having someone who knows the Corporate Warehouse terrain well enough to move with confidence when others are standing still.
That’s what 40 years in this market provides. Not a prediction of what trade policy will look like in 18 months. A clear-eyed read of what the ground looks like right now, and a path through it built to hold up under changing conditions.
If tariff uncertainty has your real estate decisions on hold, that’s worth a direct conversation. Contact Fennelly Associates to talk through what smart positioning looks like for your situation right now.
