Avison Young’s CEO Mark Rose doesn’t expect too much to change for real estate during the next four years as concerns begin to emerge in the industry about the potential effects of some of the new administration’s policies.
Rose said that any apprehension over some of the impact of tariffs, immigration and even the wild card introduced by Elon Musk’s Department of Government Efficiency initiative have to be weighed against Trump objectives including securing the borders and dealing with fentanyl coming into the country.
Tariffs on imported building materials including steel, aluminum and lumber are among issues real estate professionals are keeping their eyes on as financial indications look positive, according to new reports from brokerages and analysts.
The economy is entering 2025 “with remarkable underlying strength and resilience,” property services firm Cushman & Wakefield said in its outlook for the year. Similarly, in a real estate outlook, global consultancy PwC highlighted that the mood heading into the new year was one of cautious optimism. Against that backdrop, Rose said, it's important to look at the big picture when it comes to shifts in U.S. politics.
“My biggest surprise is that people are surprised,” said Rose, who spoke at a roundtable event this week at Canada-based Avison Young's office in Fort Lauderdale, Florida.
He acknowledged that colleagues in his firm's home country “have not been happy” with the president’s comments about incorporating Canada as the 51st state. Ultimately, Rose said, it is important to remember that the administration is working toward specific goals, even if the end result isn't immediately apparent to outside observers.
“We do know that the president wants to get to certain outcomes, which he may have already gotten to with Mexico and Canada," Rose said. "It's possible that's the last time that we'll hear about tariffs for the southern neighbor and the northern neighbor, but we just don't know.”
He added that those who were concerned about the next few years “have to take that step back” and remind themselves that “not a whole lot is different.”
“I see this as short-term issues that we're going to have to deal with. I think most of them are going to be debated in the media, and less in" the real estate world, Rose said.
Discounts for debt
Although geopolitical issues are typically outside the control of most in the commercial real estate industry, one factor — ongoing return-to-office mandates — bode well for office owners, Avison Young leaders said.
Rose said that although he expected a widespread return-to-office this year, it would begin “incrementally," and alongside improving financial conditions, would lead to a full recovery over the next two years.
“Liquidity is open, deals are opening, and that will lead to a recovery in 2026 or 2027. Most likely 2026 if it follows the path” of previous cycles, Rose said.
Michael Fay, managing director of Avison Young who also serves as its chairman of U.S. Capital Markets, said the company is advising clients on how best to move forward with office acquisitions.
“We’re working with clients who are building funds to do one of three things … buy it low and have a leasing strategy, buy it low and do a retrofit, buy it low and do a convert.”
Fay noted, however, that assets with debt are going to “trade at discounted prices.” Over the course of the past few years, banks “had to watch their own balance sheets, and they pretended and extended” as the maturity dates of loans were extended and pushed back, Fay said.
“If you have properties that have debt on them, and you don't have the money to reinvest or you can't refinance, maybe because you have a leasing issue, those properties are going to trade at significant discounts,” Fay said.
Certain markets like New York, Miami and Abu Dhabi “might be better” with fewer discounts for office deals, Fay said.