**Tariffs and CRE Lending: The Challenges**
*By Connect CRE Staff Writer*
![Tariff Impact Image]
![Dhaval Parikh Headshot]
*Dhaval Parikh*
Continually evolving tariff strategies and government announcements are adding to the current economic uncertainty. A recent report from Parkview Financial, titled *The Implication on CRE Lending*, suggests that this unpredictability is having a growing impact across the commercial real estate (CRE) sector. While CRE typically reacts more slowly to broader macroeconomic changes, the ongoing volatility in trade relations is beginning to push adjustments in real estate fundamentals.
Dhaval Parikh, Managing Director and Head of Capital Raising and Investor Relations at Parkview, noted that this uncertainty around tariffs is influencing construction costs, delivery timelines, and underwriting strategy. “It’s not surprising that these dynamics are shaping the CRE landscape,” Parikh told Connect CRE.
### Is Stagflation Lurking in the Wings?
The Parkview report also addressed the possibility of stagflation—an economic scenario where inflation remains high while growth slows and unemployment rises. The Federal Reserve, it notes, may be compelled to cut interest rates if trade tensions continue to suppress economic and consumer confidence and lead to deeper job losses.
However, while lower interest rates could be stimulative, they lose effectiveness if inflation persists. High inflation, coupled with rising unemployment and weak economic growth, could place the Federal Reserve in a difficult position. “The Fed may be caught in a bind,” the report states.
![CRE Lending Concept]
Parikh emphasized the challenge stagflation presents to the commercial real estate market. “Slower economic growth could mean less demand for real estate,” he said. “Coupled with elevated interest rates aimed at combating inflation, we could see declining property valuations.” He also pointed out that refinancing would become more complicated under such conditions. Property owners may need to inject additional equity to adjust capital stacks, as slower rent growth, higher financing costs, and falling valuations take hold.
### Are There Possible Solutions?
Despite these challenges, there may be strategies to mitigate the impact. Parikh recommends that developers revise their underwriting models to better reflect elevated pricing and elongated project timelines. “This can provide a more realistic framework for planning,” he noted.
From an investment perspective, Parikh sees promise in select geographic markets. Regions with constrained supply may experience demand that outpaces it, potentially making them more robust against economic stagnation and inflation pressures resulting from tariffs.
Asset class selection is also key. Parikh highlights multifamily and single-family housing as necessity-based asset types that tend to be more resilient during downturns. Stabilized properties and those requiring limited renovations may be less susceptible to rising costs.
Looking at lending opportunities, Parikh said, “We currently favor bridge financing on multifamily assets with a clear path to stabilization.” He advocates selecting properties in markets with a balanced supply-demand outlook and strong long-term fundamentals.
While ongoing shifts in trade policy and macroeconomic signals continue to complicate the commercial real estate landscape, adapting strategies to context-specific realities may provide a way forward.
