Location Strategy Chartbook 04.26.25

Fortune & CNBC: Logistics experts are warning that cargo volumes at U.S. ports are undergoing a precipitous drop. This trend is most apparent in Los Angeles, home to the nation’s busiest port, and one that is first to feel any drop-off from Asian shipping.

The fallout from the ocean freight slowdown is beginning to hit ground transport linked to ports.

“We are at a tipping point on the West Coast,” said Ken Adamo, chief of analytics at DAT Freight & Analytics. “Looking at how many truck loads are available versus trucks, we’ve seen a precipitous drop, over 700,000 loads have evaporated nationally in the past week compared to two weeks prior,” he said.

Institutional Property Advisors: Brandon Roth reached out to 25 institutional JV equity investors this month on how they expect tariffs to impact their investment appetite and strategy.

Here is a summary + quotes:

Investment Appetite - Investors remain active but are approaching new deals with increased caution due to the uncertainty surrounding the new tariffs and their potential ripple effects. Some see the dislocation as an opportunity, but overall risk appetite is clearly down.

Investors are prioritizing existing cash flowing assets over ground-up development due to the impact tariffs will have on construction costs. There’s a shift towards more defensive, demand-driven assets like small bay industrial, affordable housing, and infill retail.

Some investors see the tariffs as a short-term headwind, citing increased development costs, leasing uncertainty, and reduced consumer spending. While near-term volatility remains a concern, others believe the shift toward domestic production could create new opportunities over time.

• "As a fund, we're never really on the sidelines, and we are looking for diversification on a number of fronts, including over time. We will continue to look for compelling investments, with a focus on multifamily assets in growing markets.”

• "We still generally feel good about CRE and believe it is relatively well-positioned compared to other asset classes. We’re starting at a reasonable valuation underwriting, and the asset class should benefit from lower supply growth over the medium term. We remain cautious but are still pursuing high-quality assets.”

• "I think we’re all still feeling out what may or may not occur within the tariff landscape but actively looking for new deals and new JV opportunities regardless. We are still in buy mode for our latest investment fund and hopefully this creates some dislocation that we can take advantage of.”

• “We will continue to pursue investments in industrial and housing sectors (BTR, Multi, land). We will be careful looking at markets and asset classes that are more resilient in the current climate.”

• "Still open for business, but bar is much higher and look for deeper relative value proposition, as values may be subject to change e.g. deteriorating fundamentals.”

• "Look for opportunities while others are on the sidelines.”

• “The tariffs bring great uncertainty with development (costs) and demand, but we are confident that there will be buying opportunities.”

• “Definitely makes you pause to see the impacts to materials and the economy.“

• "I don’t know where we are, and I don’t know where we’re going. Investment appetite for risk is down.”

• “Would say likely some near term patience as folks begin to understand the impact of tariffs so we can UW it appropriately.”

• “Right now, it’s more about uncertainty than it is about costs. Obviously, it will impact underwriting, and land will be the first impacted. It will likely slow down decision making as we think about how to best deploy capital around the globe.”

• “We are likely going to hold off on any new investments until the dust settles and we have a better idea of the impacts of the tariffs.”

• "Near term, plan to focus on shallow bay industrial which continues to benefit from supply / demand imbalance. Selectively evaluate bulk warehouse product. Interested to see how manufacturing product (limited quality product as it hasn’t been built in bulk since the 70s) trades. Suspect buildings with power will become valuable quickly as there is a long lead time to secure power for buildings and much of the supply chain is sourced from China.”

• “Focus on durable, demand-driven asset classes. Emphasize sectors that benefit from sticky demand (e.g., housing shortage, supply chain shifts) and limited exposure to trade volatility (e.g., neighborhood retail or infill industrial vs. import/export-dependent uses). Reassess markets with construction booms. In overbuilt submarkets, the cost disadvantage caused by tariffs may deter new supply, which could tighten fundamentals over time — creating buying opportunities in 12–18 months.”

• “Focus will shift away from assets that are dependent on trade (ie. Border / port industrial).”

• "Today we have three targeted investment themes, (i) Affordable Housing, (ii) Student Housing, and (iii) alternative industrial (i.e. industrial outdoor storage, shallow-bay industrial, etc.) I don’t expect us to re-visit themes one and two as they are essential in nature.”

• “If one were to invest in industrial today, I think you want smaller properties vs mega-sized properties, I think you want existing improvements as opposed to new development, I think you want the properties to be closer to urban centers or existing manufacturing areas and I think you are better off buying in-place cash flow as opposed to buying vacancy – even if the WALT is short, because companies may be more likely to stay in- place as opposed to make larger commitments that would require relocation.”

• “It seems likely that the sectors most impacted could be industrial and retail. In the short term, this could lead to uncertainty around leasing, but long term, the tariffs could be beneficial, especially for industrial. Since we are focused mostly on multifamily, the biggest impacts will likely be the reduced disposable income for most households and higher cost of building materials. We will remain conservative in our underwriting assumptions regarding rent growth and will look for submarkets with above-average median incomes.”

D.R. Horton saw its biggest year-over-year drop in net new orders in its South Central (which includes Texas), Southwest, and Southeast (which includes Florida) divisions.

“I think you look at our concentration in Texas and through Florida, and certainly when those markets are a little softer, it’s going to cause us to have fewer starts in those markets in response to market conditions.” - D.R. Horton CEO Paul Romanowski told investors this week.

Romanowski added that: “We have expanded our geographic footprint and have some newer markets that are seeing good stable activity without much supply and we’re expecting some of those markets to grow potentially beyond our expectations. So it really is a balance, but it is market to market and community to community across our platform.”

While some markets are down from their peak prices, all of the major markets are still way up from their March 2025 price levels

• First time homebuyers are at their lowest levels

• 15% of buyers purchased a new home, and 85% of buyers purchased a previously-owned home

• Recent buyers who purchased new homes were most often looking to avoid renovations and problems with plumbing or electricity at 42%

• Buyers who purchased previously-owned homes considered them a better value at 31%

• Detached single-family homes continued to be the most common home type for recent buyers at 75%, followed by townhouses or row houses at 7%

• Senior-related housing remained at 19% of buyers over the age of 60 this year

• 58% purchased a detached single-family home, and 52% bought in a suburb or subdivision

• The median distance between the home that recent buyers purchased and the home they moved from was 20 miles. This is down from the 2022 report of 50 miles but remains elevated from the distance of 15 miles seen from 2018 to 2021

• Quality of the neighborhood (59%), convenience to friends and family (45%) and overall home affordability (36%) remained the most important factors to recent home buyers when choosing a neighborhood

• Buyers typically purchased a home that was built in 1994. This is a rebound after the last two years, when buyers typically purchased a home built in the 1980s

• Overall, buyers expected to live in their homes for a median of 15 years, while 25% said that they were never moving.

Of the 72 U.S. markets with at least 50,000 apartment units, 68, or roughly 94%, saw an increase in quarter-over-quarter rent performance. This marks a major shift compared to the final quarter of 2024, where only 30 markets or 42% of the total, saw an increase in the average quarterly rent.

Existing-home sales descended in March, according to the National Association of REALTORS®. Sales slid in all four major U.S. regions. Year-over-year, sales dropped in the Midwest and South, increased in the West and were unchanged in the Northeast.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – fell 5.9% from February to a seasonally adjusted annual rate of 4.02 million in March. Year-over-year, sales drew back 2.4% (down from 4.12 million in March 2024). ... Total housing inventory registered at the end of March was 1.33 million units, up 8.1% from February and 19.8% from one year ago (1.11 million). Unsold inventory sits at a 4.0-month supply at the current sales pace, up from 3.5 months in February and 3.2 months in March 2024.

Inventory was up 19.8% year-over-year (blue) in March compared to March 2024. Months of supply (red) increased to 4.0 months in March from 3.5 months the previous month.

Looking back to pre-pandemic levels, in March 2019 months-of-supply was at 3.8 months, so there is more supply now, on a months-of-supply basis, than prior to the pandemic! Even though inventory is down compared to 2019, sales have fallen even more - pushing up months-of-supply.