The demand for warehouses used to move goods through the ports of Los Angeles County is expected to undermine the economic vitality of one of the world’s largest industrial property markets if widespread tariffs are in effect.
The leases of buildings used to collect and distribute imported goods have at least been temporarily delayed as companies wait to see if they will hold the announced fees or maintain ease through negotiations.
President Trump temporarily supported tariffs in most countries for 90 days on Wednesday, but raised the tax rate on China’s imports to 125%.
If tariffs reduce imports by 25%, as predicted by the tax fund think tank, the outcome will be “significantly negative for the industrial market,” said analyst Jesse Gandersheim, with an increase in vacancies and a slower new construction.
Many business owners are reluctant to expand into new spaces because they don’t know how tariffs will affect demand, he said.
Typically, imports that move around local warehouses include electronic consumer goods such as televisions and computers, and apparel such as clothing and shoes.
“Will all of these tariffs fall into place? Will some be negotiated? How long will they last?” said Gundersheim, senior director of market analysis at real estate data provider Costar. “The unknowns around it are not good for business. Not good for decision-making.”
With Trump’s overall 10% tariffs around the world and the high tariffs imposed on many Asian trading partners, economists say trade, one of the main drivers of the Los Angeles region’s economy, is likely to be hit hard.
The tariffs include additional operations of 24% in Japan and 25% in Korea. On Wednesday, the president raised the tax rate on Chinese imports to 125%.
Canada and Mexico will be excluded from both baseline and additional tariffs, which could mitigate the effectiveness of grocery stores. Most of the US produces imports from Mexico and Canada, including avocados, cucumbers and mushrooms. However, the country still faces 25% collection on certain goods and 25% tariffs on cars and mild trucks.
Customs duties will reduce imports by just over $800 billion in 2025.
Analysts say that while only goods trade is directly affected by tariffs, the indirect impact is far-reaching. One of the many industries thought to be affected by tariffs is real estate.
Southern California is the world’s fourth largest industrial real estate market after the US, China and Japan as a whole, says Laura Clark, Chief Operating Officer of Rexford Industrial Realty Inc.
The Los Angeles Real Estate Investment Trust owns and operates 425 industrial properties in Southern California, totaling over 50 million square feet. Its tenants include wholesale, manufacturing, warehouse and transportation, retail and construction companies.
“Macroeconomic uncertainty is perhaps the biggest challenge tenants,” she said. “This is a very fluid time in the market and the news feels constantly changing.”
Uncertainty about the costs of doing business could delay tenants in making decisions about expanding and shaping their business in the near future.
“It’s too early to see how tenants are responding and how decisions change,” Clark said.
Fortunately for landlords, the unpredictability arrived when the local industrial property market saw a pickup of tenants’ demand compared to last year, she said, and there is demand for industrial buildings in various sectors, including aerospace, electric vehicles, defense, manufacturing, and distribution of first and last mile consumer products.
“We’ve also seen strong growth in construction transactions,” she said. It focused on building more homes in Southern California and the beginning of an increasing demand for space for services to rebuild structures destroyed by the January wildfire.
A recent report by real estate brokerage JLL found that the completion of a new industrial property in Southern California was at its lowest in 10 years in 2024. It leads to a decrease in seat availability and a rise in rent, and “sets the stage for the next cyclical rise.”
However, the forecast for economic growth stated that “we cannot capture a volatile and unpredictable policy environment under President Trump, as tariffs change and therefore time scales that affect the economy may be affected by political whim.
“The impact on global growth and the growth of many economies is certainly negative,” the report said.
According to David Fan, JLL’s senior director of research for Southern California, companies are delaying orders for imports as tariffs and uncertainty rise. If you want to make a wholesale purchase, “it takes time for the customer to make a decision.”
Wholesalers will give customers at least some extra costs, he said, “But that’s also eating a little on their margin.”
Consumer spending at the retail level “still looks solid,” fans said. But “If there’s less discretionary money people spend, then everything we have to pay is expensive, that’s not surprising.”
Tarist tariffs could be long-term positive for the industrial real estate sector if the administration reaches its administration’s goal of increasing manufacturing reuse to the US, according to real estate researcher Commercial Edge. “In the short term, tariff uncertainty leads to delayed lease decisions,” said the tenant.
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