The Bright Side of the Trade Turbulence

Trade disputes and tariffs are the current hot topic for industrial investors, and there is some question if this could be industrial’s black swan for what is otherwise a roaring bull market. However, most investors aren’t concerned, looking to strong fundamentals to offset any disruption from trade disputes. On the other hand, some investors are actually finding a bright side to the trade turbulence, according to a survey from Real Capital Markets.

“Some industry experts/survey participants voiced optimism that USMCA, the new NAFTA agreement, ultimately would be approved by Congress and bring a boost to the industrial sector,” Tina Lichens, COO of Real Capital Markets, tells GlobeSt.com. “The new pact increases workers’ pay in Mexico, makes U.S. pay rates more competitive, and calls for 40% of the steel used in the manufacturing of automobiles to be made in the U.S.. These types of expected outcomes continue to shape and redefining the global supply chain, through tariffs and other means, and this important agreement is viewed as one more step toward strengthening the U.S. industrial sector.”

Still, investors are keeping a close eye on trade and tariffs, because they could impact the industrial sector, particularly in port markets. “Trade issues will continue to be a factor that investors and brokers watch, but investors look at many factors when evaluating buying or selling commercial real estate,” says Lichens.

However, there is more good than bad in the industrial market, and trade issues are now one of many factors that industrial investors are analyzing on investments. “Market fundamentals, such as leasing velocity and construction, as well as cap rates, interest rates and overall economic factors also play into investment decisions. Our investment clients represent a wide range of companies, from those transacting on a global scale to those focused on U.S. port markets, such as Los Angeles, New Jersey, and Savannah, or core industrial markets, such as Dallas and Chicago, so there will be a varying degree of impact depending on their vantage point,” says Lichens.

The industrial sector has evolved this cycle. It is not only seeing high demand, but it is more dynamic than ever. That will help it weather not only a downturn but also the volatility from these trade disputes. “The unique aspect about the industrial sector is its ability to weather these types of disruptions,” says Lichens. “With so much strong activity from e-commerce driving leasing and construction growth, we expect the investment pipeline to continue to grow and create more opportunities for investors in 2020 and beyond.”