Contact Us
News

Trade Disputes, Border Uncertainty Cloud Industrial Sector Outlook

Want to get a jump-start on upcoming deals? Meet the major players at one of our upcoming national events!

After recent years of strong growth and heightened investor interest, uncertainty is beginning to creep into the U.S. industrial real estate market, and trade friction is a significant reason why.

Trade Disputes, Border Uncertainty Cloud Industrial Sector Outlook
San Ysidro Border Crossing

Global trade growth has stalled as the U.S.-China trade dispute continues, goods are moving more slowly across U.S. borders, and President Donald Trump has mused in public about closing the entire U.S.-Mexico border, though recently he seemed to back away from the idea.

"Protectionist trade policies and retaliatory measures have slowed the flow of goods in and out of warehouses and distribution facilities, impacting demand and pricing for industrial real estate after years of sustained growth," BDO partner Stuart Eisenberg wrote in Commercial Property Executive.

According to BDO data, development of distribution facilities is down. In 2016, the annual average number of distribution buildings under construction nationwide was 342. In 2018, that figure dropped to 76.

Eisenberg cites U.S.-China tensions as being primarily responsible for slowing trade and thus increasing developers' anxiety about undertaking more industrial projects.

The total volume of goods crossing borders worldwide increased in 2018 by 3.3%, but that was down from an increase of 4.7% in 2017, according to the Netherlands Bureau for Economic Policy Analysis. Much of the dip was because of a decrease in trade in and out of China, though trade originating in other countries slowed down as well.

U.S.-Mexico trade tensions, which have the added complication of uncertain immigration policy, might also impact the industrial market as trans-border logistics are gummed up.

The latest example of that came this week when border crossings between the United States and Mexico were roiled after the Department of Homeland Security diverted U.S. Customs and Border Protection officers from posts processing legal travelers to deal with migrant families applying for asylum.

With fewer officers to handle the steady flow of commercial traffic across the border, wait times have increased at border crossings in San Diego, El Paso and other places. 

The delays are already having an economic impact, including in the agricultural sector, but also the automotive industry, whose logistics span industrial facilities on both sides of the border, the Wall Street Journal reports.

“I’m getting calls from a number of businesspeople in the area and they’re concerned about orders on the back end of the manufacturing process," Jon Barela, chief executive of the Borderplex Alliance, an advocacy group in El Paso, told the WSJ.

"Their clients — manufacturers and logistics companies — are very concerned that orders will be curtailed or even stopped."