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Despite President Donald Trump announcing that “the American Dream is unstoppable,” on March 5, barely a month later, after threatening tariffs on the rest of the world, the President’s dream could become a nightmare for an industry where he made his bones — real estate.
Office markets have had a torrid time since the pandemic, but the last year has seen major cities in full recovery mode as back-to-work mandates from employees have filled desk chairs. However, with economists revising their forecasts for a recession, The Wall Street Journal reports that there is a risk that companies could freeze hiring or consider layoffs, resulting in a shrunken office footprint.
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“No one wants to be the last one to make a long lease, buy a building, or invest capital before things fall apart,” Mark Weiss, executive vice chairman of brokerage Cushman & Wakefield, told the news outlet.
Higher tariffs could also discourage new development or halt renovations on older buildings, requiring employees to stay away due to the lack of new office construction in recent years, the Journal says. “Uncertainty is the kryptonite of the commercial real-estate market,” Lonnie Hendry, chief product officer of real-estate data service Trepp, told the news outlet.
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It’s not just office space that could suffer. Residential real estate has already started to take a hit, especially in the luxury sector, where the stock market influences how much money Wall Street employees or investors can invest in real estate. The Journal reports that the stock market lost $6.6 trillion in an epic two-day collapse following the announcement of the tariffs on April 2. Multiple deals were canceled and not revived despite the pause in tariffs, which led to a recovery.
Real estate agent Aaron Kirman of Christie’s International Real Estate Southern California saw a roughly $65 million deal fall through in Bel-Air. “We’ve been on a wild ride the last two weeks. Buyers are nervous about everything,” he told the Journal. “When news cycles get too negative, it just really makes people second-guess their decisions,” he added.
Some of the biggest investors in U.S. real estate are Canadians who leave their snowy homeland during the winter to travel south. The Journal reports that many have decided it’s time to cash out amid fears that the President could choose to punish them if they own homes in the U.S.
“The final decision was based on the political situation,” a Canadian homeowner who sold a two-bedroom, two-bathroom condo in Pompano Beach, Florida, in March. “We were scared of what might happen.”
A weak Canadian dollar and increased insurance and property taxes have also contributed to Canadians selling their American winter homes. However, the hostile rhetoric towards their homeland has been the final straw for many. “I was seriously looking to buy a condo, but now how he’s treating our beloved country, Canada — I have decided to abandon the plans for now… Why would I spend my money here?” A prospective buyer told the Journal.
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This article How The Trade War Is Affecting Real Estate: Overseas Owners Are Cashing Out, Wealthy Buyers Are Backing Out, And Office Market Recovery Is Teetering originally appeared on Benzinga.com
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