The introduction of tariffs on US imports could have complex consequences for the industrial and logistics sector, including weakening demand for real estate, and a potential uptick in tenant turnover. For investors and owners, it is essential to understand the risks associated with tenants’ business, and to appropriately communicate this to insurers.
How tariffs are impacting industrial and logistics
On 2 April 2025, US President Donald Trump unveiled a sweeping set of tariffs (opens a new window) – inducing turmoil within financial markets and significantly disrupting international trade. Despite the UK and EU having limited US imports, the policy has severely weakened consumer confidence (opens a new window). The UK has since signed a trade agreement with the US (opens a new window), but lingering tariffs and ongoing uncertainty continue to impede growth.
According to Savills, the industrial & logistics market (opens a new window) is the most likely real estate sector at risk from disruption and tariffs, potentially derailing the 3% year-on-year increase (to $41 billion) in investment the sector experienced globally in Q1 2025. Tenants are likely to face higher costs and significant supply chain disruption, which may be passed on to consumers in the shape of higher prices. If these factors reduce the overall volume of business trade, demand for industrial and logistics assets will suffer.
How could the sector respond?
For investors and owners of industrial and logistics real estate, the consequences are likely to be mixed. With future trade conditions difficult to forecast, uncertainty remains high. Occupiers could be tempted to pause decision making as they await a period of stability, thereby exacerbating a vacancy rate that has already exceeded 7.5% in 2025 – its highest level since 2011 (opens a new window).
On the other hand, uncertainty encourages stockpiling; with future trade relations becoming harder to predict, this could translate into a so-called ‘V-shaped’ take-up response. Likewise, the lingering effect of tariffs could reshape global trade networks, driving fresh demand for storage facilities. This includes a potential expansion into UK and EU markets from businesses hit particularly hard by US tariffs, such as those based in China and South-East Asia. Others may sense an opportunity where US-affiliated businesses have been forced to retreat. Ultimately, these factors could trigger an acceleration in tenant turnover.
Understanding your tenants’ risks
If your property is welcoming a new tenant, it is critical that you notify your insurer and broker as early as possible. Ideally, this should be before the tenant has moved in or began operations.
Property owners have a duty to provide insurers with a fair presentation of their risk. A vital component of this is the need to understand your tenants’ risks. New businesses, or tenants with little exposure to the UK/EU, may have processes regarding storage, distribution, and manufacturing that differ from those to which you are accustomed. These differences will impact their risk profile, inviting questions from insurers who will be keen to understand their practices. Property owners must conduct thorough due diligence to comprehensively understand these tenants’ risk management processes.
Typically, new tenants will want to fit out premises before moving in and beginning operations. This can be a key source of risk. Tenants may spend large volumes of money for refurbishments, and tailored insurance solutions are likely to be required to appropriately cover these works.
Once a fit-out has been complete, you should review your risk exposure to determine whether additional coverage is necessary. For example, if renovations include the introduction of advanced facility management systems, this may invite new cyber risks. Additionally, property enhancements may lead to increased reinstatement costs in the event of a loss – possibly requiring an updated reinstatement valuation.
Talk to Lockton
For further information, please visit our Real Estate and Construction page (opens a new window), or contact a member of the Lockton REAC team.
