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.
Several industrial landlords with large portfolios in New England and across the East Coast expressed concerns at Bisnow’s Boston Industrial & Logistics Conference that tenants are becoming more hesitant to make leasing decisions due to this uncertainty.
John O’Leary of Rhino Capital, Nate Finch of Eversource Energy, David Wilkinson of Camber Development, Michael Nelligan of Portman Development, Michael Shunta of Oliver Street Capital, and George Green of Arco National Construction all contributed to this discussion.
Participants noted that tariffs, combined with concerns surrounding higher costs, interest rates, and capital markets, have complicated tenants’ real estate strategies in the near term.
“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 subsequent 90-day pause on higher tariffs for many countries, industrial tenants have felt pressure to make real estate decisions while grappling with uncertainty.
“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 noted that big industrial markets had been experiencing positive leasing momentum prior to April 2.
“That’s obviously causing a lot of angst out there,” he remarked.
Nationally, the industrial sector had positive net absorption of 23.1 million square feet in the first quarter of 2025, down from 42.4 million square feet in Q4 but in line with levels absorbed in the same quarter last year, according to Cushman & Wakefield.
Despite this, the national vacancy rate rose 30 basis points to 7% at the end of the first quarter.
In Greater Boston, the vacancy rate climbed to 7.8% in Q1, reflecting an increase of 30 basis points quarter-over-quarter, according to CBRE.
The market recorded 2.5 million square feet of transactions in Q1, driven primarily by renewals and demand under 100,000 square feet.
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 also participated in the conference.
Industrial REIT Prologis reported closing roughly 80 leases totaling more than 6 million square feet over the last two weeks, which is approximately 20% below its average pace, as stated during their Q1 earnings call on Wednesday.
Wheeler noted that while Prologis and other large third-party logistics companies might not be impacted by smaller tariffs, they could feel the effects of larger tariffs down the road.
“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 stated that the average lease lead time in Q1 was 64 days, which is 10 days above its historical average.
Despite these developments, Prologis stated that it is cutting up to $1 billion from its development plans but still maintains 95% occupancy in its portfolio and expects that number to remain steady throughout the year.
Camber Development Managing Partner David Wilkinson remarked, “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.”
He further noted that, when considering the alternative of relocating, many tenants are willing to accept higher rents to stay in place rather than incur the costs associated with a move.
Despite the overall slowdown, not all industrial activity has waned, as major global companies like Apple and Nvidia have announced significant investments in manufacturing facilities in the United States.
Apple recently announced plans to invest $500 billion in the U.S. over the next four years, while Nvidia revealed plans to build over 1 million square feet of factories in the U.S. for producing artificial intelligence supercomputers in Texas.
However, the demand these large companies could generate is likely not to benefit New England, as they appear to be focusing on larger industrial markets in California and Texas, as noted by the panelists at the Bisnow event.
David Wilkinson stated, “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.”
He predicted that this would play out across the country.
Yet, Wilkinson also mentioned that the Boston area could see benefits from 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 revealed plans to develop four new manufacturing facilities as part of its efforts to bring critical capabilities of small molecule chemical synthesis back to the U.S.
“A lot of that’s going to go to their plant in Indiana that’s already mission critical,” said Wilkinson.
“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.”
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