Tariffs, Rates, and Real Estate Investment Impact

Over the past few weeks, we have seen how the development of the tariffs have rocked the financial market, and also disrupt the global trading order.

But there are some sectors which actually benefit from it, so in the article I would like to examine the relationships of tariffs, interest rates and real estate investment. The interplay between tariff-induced economic turbulence, interest rates, and real estate/REIT investments is complex, with potential benefits and risks.

Key Mechanisms

Interest Rates and Tariffs

Lower Rates Stimulus: Economic uncertainty from tariffs may prompt central banks to cut rates to spur growth, reducing borrowing costs.

Inflation Risks: Tariffs on imports (e.g., steel, electronics) could raise input costs, potentially leading to stagflation (slower growth + higher prices), complicating central bank responses.

Real Estate Implications

Cheaper Financing: Lower rates reduce mortgage costs, boosting demand for residential/commercial properties and lifting prices.

Yield Appeal: Real estate and REITs may attract investors fleeing low-yield bonds, supporting valuations.

Construction Costs: Tariffs on materials (e.g., steel, lumber) could raise development expenses, constraining supply and offsetting demand benefits.

REIT-Specific Factors

Dividend Demand: REITs’ high yields become more attractive in a low-rate environment.

Sector Variability: Industrial REITs may benefit from reshoring (e.g., warehousing demand), while retail REITs face risks from consumer spending declines.

Potential Benefits

Increased Property Demand: Lower rates encourage homebuying and refinancing, supporting residential markets.

Capital Appreciation: Asset reflation (higher property values) benefits existing real estate holders.

REIT Performance: Enhanced dividends and investor appetite could drive REIT share prices up.

Risks and Caveats

Inflation Pressures: If tariffs fuel sustained inflation, central banks may hike rates, reversing benefits.

Economic Slowdown: Prolonged trade tensions could reduce corporate expansion, hurting office/retail real estate.

Currency Effects: A stronger dollar (from safe-haven flows) may deter foreign real estate investment.

Sector Divergence: Industrial (e.g., logistics) vs. retail/hospitality REITs may see contrasting impacts.

Here Are The U.S. Reit Stocks We Can Consider :

Cell Tower & Infrastructure REITs

Growth Driver: 5G rollout and mobile data growth.

$American Tower(AMT)$ : Global leader in cell tower infrastructure. Recurring revenue from telecom leases.

Stable Share Price, Return Exceed Industry, Volatility Over Time Stable

If we looked at the long term forecast for this company, in terms of the return compared to industry, AMT exceeded the US Specialized REITs industry which returned 9.5% over the past year.

And AMT exceeded the US Market which returned 4.6% over the past year. Looking at price volatilty, we have not seen AMT exhibit any significant price volatility in the past 3 months compared to the US market.

The weekly volatility for AMT remains at (4%) has been stable over the past year.

American Tower (AMT) Currently Trade Below Fair Value

Using the fair value from Simply Wall Street, AMT is current trading at around $222 which is below the estimate fair value of ($307).

This is significantly below the fair value by more than 20%.

Dividends Play - Trailing Yield Of 2.8% Not Bad Though Lower

There will be a payment of dividends of 2.8% for eligible shareholders who must have bought the stock before 11 April 2025. Payment date would be 28 April 2025, though the trailing yield of 2.8% is lower than the top quartile of American dividend payers (4.9%), we could look at this stock for a long term play.

Considering that it is also lower than average of industry peers (3.8%), but we should be looking at the domestic demand that would boost their business as it would not be impacted by the tariffs, the only things that might hit AMT is the interest rate.

Summary

While tariff-driven rate cuts could create tailwinds for real estate and REITs through cheaper financing and yield-seeking behavior, the outcomes might hinge on:

1. Central banks’ ability to balance growth and inflation.

2. Material cost pass-through from tariffs.

3. Sector-specific demand shifts (e.g., industrial vs. retail).

So to mitigate the risk and also adjust our strategy to more defensive as we are uncertain how long the tariffs negotiation could go on.

Appreciate if you could share your thoughts in the comment section whether you think it is a good idea to look at U.S. domestic large real estate player to protect our portfolio from the risk and impact from tariffs (old and upcoming).

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.

$Vanguard Real Estate ETF(VNQ)$ $iShares U.S. Real Estate ETF(IYR)$ $Real Estate Select Sector SPDR Fund(XLRE)$