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The first half of 2025 has seen massive economic change with the Trump administration rapidly reshaping the country’s economic landscape, AI blossoming into one of the most important business phenomena in the 21st century, and Congress on the cusp of passing the 4 trillion dollar “Big Beautiful Bill”. While these big picture events have captured the headlines, on the ground CRE projects are breaking ground or facing cancellation based on the new landscape of the American economy. In this article, we will dig into specific case studies of major projects that either broke ground or were cancelled over the last few months.
Cost of inputs
Trump’s tariffs are likely to raise the cost of many industrial inputs in the near term. These impacts are felt directly from sector-specific raw material tariffs (e.g., steel and aluminum) and through the impact of tariffs on the entire supply chain. Across many sectors, large industrial firms are re-evaluating construction and capital improvement plans in light of the changed economic situation.
- Erie, PA Recycling Plant – Canceled Due to Tariffs: International Recycling Group had planned a $300 million recycling facility in Erie, Pennsylvania, to process plastics. In April 2025, IRG scrapped construction plans, citing the inability to secure funding amid rising equipment costs from new tariffs. Steel and machinery import duties inflated the project budget, and financing fell through as lenders grew wary of trade policy volatility. This cancellation underscores how tariffs directly derailed a shovel-ready industrial project, costing the region 300+ expected jobs.
Amid months of tariff whiplash and policy uncertainty, U.S. imports from China fell for three straight months through April 2025, dropping 14% in April alone to the lowest level since March 2020, as proposed rates swung from 10% to 104% before settling at 55% under a pending trade deal.
Changes to clean energy subsidies
One of the largest immediate impacts of the “Big Beautiful Bill” will be a rapid rollback of green energy subsidies. The Biden administration’s signature legislative achievement, the Inflation Reduction Act (IRA), dramatically expanded green energy subsidies across various sectors with incentives for power plant development, battery manufacturing, and other green industrial projects. The BBB and Trump administration economic policies have also taken aim at the demand side of the green economy, proposing to end EV subsidies. The majority of these financial incentives are on the chopping block in the House’s version, “BBB,” leading to deterioration of the financing environment for green economy projects.
- KORE Power Battery Gigafactory – Construction Halted: KORE Power, a battery manufacturer, commenced work on a $1.25 billion lithium-ion battery plant in Buckeye, Arizona, with support from a conditional $850M DOE loan. However, in early 2025, KORE halted construction mid-stream. The company opted to delay the greenfield factory and instead retrofit an existing facility. They cited uncertainty around shifting federal tariff policies and EV tax credit rules (critical to battery economics) as a key factor. With the tariff outlook murky and battery materials potentially subject to future duties, KORE took a pause rather than risk overbuilding.
This illustrates the chilling effect of policy swings on clean-tech manufacturing investment, a sector the administration ostensibly wants to encourage.
AI Demand
The rapid build-up of the AI industry and its colossal computing needs have shaped the Industrial CRE sector and led data center properties to be one of the best-performing Industrial CRE subcategories. The scale of the expected AI computing explosion has led to a gold rush of data center construction. At the same time, rapid technological breakthroughs like Deepseek’s AI system, which required far less computational power to change, have thrown some high-end computational need projections into doubt. At the same time, tariffs may both increase the cost of producing chips and dampen markets for chip exports as a result of changes in demand. As such, major players have been tempering their most rosy AI growth expectations and adopting a more conservative footing with regard to AI buildouts.
- Intel “Ohio One” Chip Plant – Delayed Expansion: In 2022, Intel announced a landmark $20 billion semiconductor fab project near Columbus, Ohio, bolstered by federal CHIPS Act incentives. Fast-forward to 2025: Intel slowed the second phase of the project, postponing new construction that was slated to start by Q1. The company attributed the delay to rising construction costs and softer chip demand. Industry observers note that steel, equipment, and cleanroom component costs have surged (partly tariff-driven), and uncertainty around export controls has clouded the global semiconductor outlook. While Intel remains committed to the site, the Phase Two delay (potentially a year or more) shows how debt-financed fiscal programs can collide with trade realities – the CHIPS incentives alone couldn’t overcome economic headwinds and cost inflation. The local impact is a slower ramp-up of thousands of jobs that were anticipated, illustrating a policy goal (tech self-reliance) meeting the complex real-world economics of implementation.
- Microsoft Data Center Portfolio – Projects Paused: Microsoft stunned local officials in Q1 2025 by pausing three large data center projects in Ohio (including a $1B New Albany campus) and others in Illinois, North Dakota, and Wisconsin. The company cited a regional cloud capacity re-evaluation – effectively an absorption pause. But behind the scenes, two policy-related factors loomed: (a) Tariff uncertainty on IT hardware (servers and electrical gear) – Microsoft was facing higher procurement costs and potential delays for critical equipment, so slowing projects could allow time for supply chains to stabilize; and (b) local power infrastructure constraints, which tie into government policy on energy.
These pauses came despite booming long-term demand, suggesting even tech giants must temporize when short-term conditions shift. The fallout includes delayed construction jobs and lost tax base growth for those communities.
Investment Climate
The second Trump administration has been characterized by harsh rhetoric towards America’s traditional allies. In light of a seemingly unfriendly America, many foreign partners have been recalibrating their approach to America and reevaluating foreign direct investment in American assets, including the CRE sector.
- Maple Eight’s Strategic Pause Amid Trade Tensions: The Maple Eight, Canada’s largest pension funds, including Canada Pension Plan Investment Board, OPTrust, and Ontario Municipal Employees Retirement System, have historically been major players in U.S. commercial real estate. However, following the 2024 U.S. presidential election and subsequent tariff escalations, several Maple Eight institutions began reassessing their U.S. allocations.
CPPIB, Canada’s largest pension plan, has expressed concerns about infrastructure investments and the risk of losing tax-exempt status, calling it “incredibly difficult” to commit new capital to U.S. private funds amid geopolitical uncertainty. The fund holds significant stakes in over 50 U.S. industrial, retail, office, and residential properties and had nearly $50 billion invested in U.S. dollar-denominated private equity funds, including Silver Lake, Carlyle, and Blackstones.
In the meantime, PensionDanmark, one of Denmark’s largest pension funds, has traditionally been an active investor in U.S. commercial real estate markets. However, in response to the 2024 U.S. tariff increases and heightened geopolitical tensions, such as public threats to acquire Greenland, these funds have begun reassessing their U.S. exposure. PensionDanmark redirected $5 billion into European investments, withdrawing $2.8 billion from US stock funds.
What’s next?
On the whole, the uncertainty of 2025 has not frozen the commercial real estate sector, but many specific projects have fallen victim to an uncertain climate. To date, substantial impacts have not yet shown up in the data, but CompStak’s industrial data on leasing trends, in particular, has shown some signs of softness that have continued through Q1 2025 that may be exacerbated by tariff changes and concerns about economic uncertainty. Among these trends:
- CompStak’s industrial rent index is down 4.7% from its late-2023 peak, 117% above its Q3 2008 baseline, after three quarters of recent declines, including a 2.2% drop in Q1 2025, the sharpest since COVID-19.
- In Q1 2025, average lease terms stayed below post-2020 peaks as bulk deals stabilized at 76.2 months (5.6% below the 2021 high) while non-bulk leases fell 11% below their 2022 peak, marking a 10th straight year-over-year decline amid economic and trade uncertainty.
- The industrial sector softened further in Q1 2025, with starting rents down 4.3% and effective rents down 5.9% from their Q4 2023 peak, marking a third straight quarter of year-over-year declines as landlords eased both face rents and concessions.
- Tenant leverage grew in Q1 2025 as free rent hit new cycle highs, averaging 4.4% of term for bulk leases and 3.0% for non-bulk, outpacing lease term declines and signaling a shift in market dynamics toward tenants.
Industrial Starting Rent Index
