ICOnic News | Navigating Tariffs: The New Trade Reality For Houston Commercial Real Estate
NAVIGATING TARIFFS: THE NEW TRADE REALITY FOR HOUSTON COMMERCIAL REAL ESTATE
Tariffs and the shifting trade policy has introduced new layers of complexity for Houston's commercial real estate market in 2025. With the city's strong ties to global trade and industrial development, local developers, investors, and tenants are feeling the ripple effects of escalating material costs, project delays, and growing economic uncertainty.
April's market turbulence stemmed largely from heightened tariff activity and fluctuating policy direction from the Trump administration. Key developments included the imposition of a 10% global tariff, alongside additional country-specific tariffs that reached as high as 145%. While the administration's subsequent 90-day suspension of the new measures, and exemptions granted for certain technology imports, offered a brief reprieve, the foundational 10% tariff remains firmly in place. Given the legal and legislative hurdles to reversing it, this policy is increasingly viewed as a lasting component of the current trade framework.
These trade actions have significantly impacted development costs, particularly for materials like steel and aluminum. In Houston, where industrial construction has been a major growth driver, developers report steel prices rising 8%-10%, adding millions in unexpected costs to large-scale projects. One warehouse project in Houston's Northwest Submarket alone exceeded its budget by more than $2 million due to escalating material expenses. As a result, construction activity has slowed sharply. In 2024, total industrial deliveries fell to 19.3 million SF, a 53.5% decline from the previous year.
For investors, these conditions are prompting more cautious strategies. Rising development costs, longer lead times, and the uncertainty of future tariffs are driving demand for higher returns. This shift is putting upward pressure on cap rates, softening valuations in certain submarkets. Lenders, meanwhile, are factoring these risks into tighter underwriting standards, creating additional headwinds for speculative or non-core development.
In light of these trends, commercial real estate professionals in Houston are re-evaluating their positioning. Many are shifting focus toward newer, high-quality assets that align with current tenant demand. Others are exploring opportunities in more resilient sectors such as self-storage, medical office, or last-mile logistics. Staying informed on global supply chain dynamics and engaging in policy advocacy are also becoming essential as trade policy continues to evolve.
Houston has long proven its ability to adapt to macroeconomic shifts, and the current tariff environment is no exception. With thoughtful strategy and proactive market awareness, stakeholders across the commercial real estate sector can continue to navigate the challenges and identify opportunities in this new landscape.
As Houston's commercial real estate market continues to adapt to the challenges posed by tariffs and trade policies, proactive strategies and informed decision-making will be crucial for navigating this period of uncertainty.
- Larry Indermuehle, CCIM, ICO CEO
ICO IN ACTION: GIVING BACK BEYOND THE OFFICE
At ICO Commercial, making a difference in the community is at the heart of who we are. From supporting local nonprofits to volunteering our time, we're committed to giving back in meaningful ways.
We're especially honored to support cancer patients and their families through organizations like Houston Haven and Sky High for Kids. This past week, our team had the privilege of stepping away from our desks and into the community to help serve at Houston Haven. We joined together to provide landscaping and cleanup work, bringing in fresh mulch, trimming trees and hedges, and giving the home a well-deserved refresh.
It's a privilege to collaborate with organizations that are truly making a difference, and we're grateful for the chance to help build a stronger, more connected community.
1. What would your dream vacation spot be, and why?
"New Zealand... have you seen Lord of the Rings?"
2. What's one thing that always makes you laugh, no matter how many times you see it?
"When the wind blows someone's hat off and it's a bonus when the wind continues to blow the hat across the ground while the wearer chases the hat."
3. What first drew you to Commercial Real Estate, and what keeps you motivated in this field?
"I’m passionate about relationship-based sales, and with so many friends in commercial real estate, there’s no better way to spend my workday than strengthening connections with the people I enjoy most."
4. What's the most exciting part of working in this industry for you?
"Getting to interact with people from all walks of life and cultural backgrounds. As well as, the team aspect required to get a deal done and everyone working toward a common goal."
5. Summary of your business and who an ideal client/prospect might be?
"My business consists of many different product types with a focus on Flex/Office. My ideal client would be a privately owned company or individual who is interested in building and maintaining a long term relationship. Also, a client who is growing or expanding their existing business by adding more square footage, an additional location, or looking to purchase a new building as part of their growth plan. An ideal client understands that the best deal financially might not be the best deal for the growth of their business."
