The uncertainty and potential risks created by the Trump administration’s tariff actions appear to be slowing leasing activity in the industrial real estate market.
Bisnow/Taylor Driscoll
Rhino Capital’s John O’Leary, Eversource Energy’s Nate Finch, Camber Development’s David Wilkinson, Portman Development’s Michael Nelligan, Oliver Street Capital’s Michael Shunta and Arco National Construction’s George Green
On top of concerns surrounding higher costs, interest rates and the capital markets, tariffs have become another issue complicating tenants’ real estate strategies in the near term.
Several industrial landlords with large portfolios in New England and across the East Coast said Thursday at Bisnow’s Boston Industrial & Logistics Conference that tenants are more hesitant to make leasing decisions due to this uncertainty. But some large companies have signaled plans to bring more manufacturing development into the country in response to tariffs.
“With the tariff component, it’s just another layer that the market needs to digest and analyze and understand before they’re to a point where they’re ready to move forward, they’re ready to negotiate, they’re ready to move and they’re ready to look at potential opportunities,” Michael Shunta, director of development and construction at Oliver Street Capital, said at the event, held at the Boston Marriott Long Wharf.
After President Donald Trump’s “Liberation Day” announcement of widespread tariffs on April 2 and a 90-day pause on higher tariffs for many countries one week later, industrial tenants have felt pressure to make real estate decisions but uncertainty about what to do.
“Now, with April 2 and all the uncertainty, I’ve talked to a lot of people that feel like requirements are now frozen or on hold, or in some cases, might be going away as they kind of figure out what’s going on with the tariffs and how that impacts their businesses,” said Colleen Wheeler, East Coast head of industrial asset management for AEW.
Cabot Properties Managing Director Michael McCarthy said big industrial markets had been seeing positive leasing momentum prior to April 2.
“That’s obviously causing a lot of angst out there,” he said.
Nationally, the industrial sector had positive net absorption of 23.1M SF in the first quarter of 2025, down from 42.4M SF in Q4 but in line with levels absorbed in the same quarter last year, according to Cushman & Wakefield. Still, the national vacancy rate rose 30 basis points to 7% at the end of the first quarter.
In Greater Boston, vacancy climbed to 7.8% in Q1, up 30 basis points quarter-over-quarter, according to CBRE. The market had 2.5M SF of transactions take place in Q1 driven by renewals and demand under 100K SF.
Bisnow/Taylor Driscoll
Lee & Associates’ Robert Elmer, Cabot Properties Inc.’s Michael McCarthy, AEW’s Colleen Wheeler, The Seyon Group’s Bryan Blake, First Citizens Bank’s Emily Rush and Dogwood Industrial Properties’ Chris Williams
Industrial REIT Prologis closed roughly 80 leases totaling more than 6M SF over the last two weeks, 20% below its average pace, the company said on its Q1 earnings call Wednesday.
Wheeler said Prologis and other big third-party logistics companies may not be impacted by the smaller tariffs, but she said they could be affected by larger tariffs down the line.
“I think Prologis, in their earnings call yesterday, said that ‘We can handle 10%, the economy can handle 10% tariffs and be okay,'” Wheeler said. “I think the bigger that gets, specifically with China, that it will be affected. Not everyone has to deal with China. I think other 3PLs will be okay.”
Prologis said the average lease lead time in Q1 was 64 days, 10 days above its historical average. The landlord said it is cutting up to $1B from its development plans but still had 95% occupancy in its portfolio and expects it will stay around there through this year.
“I think one of the things that is pretty likely to be the case is that, for tenant activity, renewals are going to be the vast majority of what we see take place,” Camber Development Managing Partner David Wilkinson said. “When you look at the alternative of relocating, the cost to do so and the fact rents aren’t what they used to be in a different building, we’ve certainly seen tenants willing to accept higher rents to stay in place.
The tariffs haven’t slowed all industrial activity, as global Fortune 500 companies like Apple and Nvidia have announced big investments in manufacturing facilities in the United States.
Apple announced it plans to spend $500B in the U.S. over the next four years. Chip manufacturer Nvidia announced plans to build more than 1M SF of factories in the U.S. to produce artificial intelligence supercomputers in Texas.
However, the demand these big companies could spur likely won’t come to New England, as they seem to be targeting bigger industrial markets in California and Texas, panelists at the Bisnow event said.
“I think the really big facilities … are going to some of the Sun Belt, some of the Southwest, where the cost of power is lower, the cost of land is lower, the cost of construction is lower,” Wilkinson said. “It’s going to play out all around the country.”
Wilkinson said the Boston area could benefit from some research and development manufacturing in the life sciences sector.
In February, Eli Lilly announced plans to double its investment in U.S. manufacturing, bringing its total commitment since 2020 to over $50 billion. The life sciences company announced plans to develop four new manufacturing facilities to further facilitate the onshoring of development of “critical capabilities of small molecule chemical synthesis.”
“A lot of that’s going to go to their plant in Indiana that’s already mission critical,” Wilkinson said of Eli Lilly. “But what we’ve heard is that they may try to put more R&D pilot scale manufacturing closer to R&D hubs on the coasts. We expect some of that to come to the Boston area.”
