But economic and policy shifts could have both positive and negative impacts on CRE. For example, the rising cost of building materials may harm multifamily developers while benefiting existing multifamily owners if new supply slackens.

Immigration reform has been a major policy initiative of President Trump in his first month in office. This could impact labor supply and availability, with construction, agriculture and hospitality likely to be most impacted by mass deportations. Immigration policies may also affect inflation and interest rates, leading to a decline in capital availability and tighter underwriting standards.

Another major policy focus is government operations, which has resulted in layoffs and lease terminations in the sector in an attempt to cut $2 trillion in federal spending. The potential impacts of Department of Government Efficiency (DOGE) activity are likely to be mixed for CRE, said the report.

If DOGE’s efforts to reduce the federal deficit are successful, interest and mortgage rates could start coming down, resulting in relief in CRE lending and returns and potentially boosting sales in the housing market. However, if homeownership increases as a result of greater affordability, the multifamily market could be negatively impacted. DOGE’s efforts also could lead to reduced demand for housing and office space in markets strongly tied to the federal government like northern Virginia and suburban Maryland.

Meanwhile, return-to-office mandates for federal workers could increase office demand and spur rent growth, pricing and transaction volume, said the report. Improving space market fundamentals could then lead to relaxed underwriting standards, greater availability of capital and ultimately a decline in distressed properties. In addition, RTO policies could breathe life into central business districts but could reduce residential demand and economic activity in non-urban and smaller markets.

Finally, tariffs could lead to rising interest rates and higher cap rates with a concurrent reduction in deal activity and an increase in distressed assets, said the report. One of the most immediate impacts of tariffs relevant to CRE will be on construction costs, with much of the country’s wood products coming from Canada and gypsum products coming from Mexico. The extra costs also have the potential to disrupt nearshoring efforts, much of which went to Mexico. On the other hand, tariffs on Mexico could drive manufacturing and transportation operations back to the United States, which could be a boon for industrial and distribution facilities.