International trade has been quite volatile lately, with the Trump administration sparking tit-for-tat trade wars with our major trading partners, including China and Canada. The uncertainty associated with real and potential trade wars is having an effect on our economy. While tariffs’ relationship to real estate is not apparent, the impact on commercial real estate (CRE) is real. Here are four ways that the trade wars have impacted CRE markets across the United States, and how the industry can address them.
1. Trade wars helped close the spigot for Chinese investment.
To understand the trade war’s impact, start with the 2014 surge in Chinese nationals buying U.S. real estate. That year, our D.C. metro area market saw an uptick of Sino investors after Beijing relaxed the rules for international investment as part of the “One Belt, One Road” strategy, aimed at increasing Chinese influence in global and regional trade. Part of this strategy included rapidly expanding overseas investment in manufacturing, technology and real estate.
This buying spree accelerated in 2015 when Beijing devalued the yuan nearly 4% to the dollar. Rattled investors poured money into the safety of the U.S. market. By 2016, Chinese purchases in the United States rose to $46 billion. Mainland buyers quickly supplanted Canadians as the top foreign purchasers of CRE assets in our region and across the country.
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