In an atmosphere of economic uncertainty exacerbated by recent tariff discussions, commercial real estate professionals are grappling with the complexities of development.
Just hours before President Donald Trump announced a 90-day partial pause on sweeping reciprocal tariffs, which have significantly impacted the commercial real estate sector, industry experts at Bisnow’s Chicago Construction & Development event expressed their concerns.
Some panelists referred to the tariffs simply as the ‘T word,’ highlighting the apprehension surrounding the issue.
Sebastian Salvadó, creative director at Rios, emphasized the increasing complexity of the development landscape at the event held at Continua Interiors.
He stated, ‘Everything has gotten more complicated, everything is more complex.’
‘Whether it’s the regulatory situation, the financial situation — which is just getting started — it’s going to get more complicated. You have to form these alliances early to have that shared intelligence to work through these things.’
Matt Wilke, chief operations officer and partner at LG Group, acknowledged the tariffs directly, noting their financial impact on ongoing projects.
Wilke discussed a $140 million construction project in Nashville, which has incurred approximately $1.4 million, or 1%, in additional costs due to tariffs.
However, he pointed out that the more significant issue is the ongoing uncertainty fueled by trade policies.
‘It’s more of the chaos and uncertainty that just gives another reason to pause funding more developments and stop businesses from thinking about expanding,’ Wilke mentioned.
Snell Properties, a developer in Arlington, Virginia, recently paused construction on two residential high-rises due to this market uncertainty, which they attribute to both tariff implications and federal workforce reductions.
Intel echoed similar sentiments, announcing a delay in their Ohio One semiconductor plant project in New Albany, Ohio, citing unpredictable political factors, including tariffs.
To navigate through the chaotic environment, Wilke stresses the importance of building partnerships based on trust and engaging in transparent discussions about profits and fees right from the project’s inception.
‘The old school ways of the design, bid, build process in our industry is almost totally out of the norm,’ Wilke stated.
He observed a shift towards increased collaboration from the very beginning stages of projects, a sentiment echoed by other panelists.
Kinjal Patel, president at James McHugh Construction, shared insights on fostering collaboration by drawing information early from the supply chain.
This proactive approach allows teams to identify potential risks early on.
‘It’s being transparent on where the risks are and where the opportunities are, and figuring out a way for all the stakeholders to somehow share in that risk and opportunity,’ Patel explained.
He noted that this transparency helps to ‘even out the lumpiness of the risk’ throughout the project lifecycle.
While the pressures currently faced by developers and investors are significant, these challenging moments can serve as catalysts for innovation and the formation of unique partnerships.
Salvadó mentioned, ‘But to effectively utilize these partnerships, developers need a strong vision for their projects’ end goals.’
Without a clear vision, projects risk faltering as they may become diluted or suffer from inefficiencies.
‘That can actually create inefficiencies, or [you] end up with something that isn’t as powerful as what you set out to do because it got watered down, because there’s too much autonomy, and not everyone’s playing the same sport,’ Salvadó concluded.
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