Shlomi Bagdadi was in the middle of negotiating a large retail lease for a global brand in New York City when President Trump announced expansive new tariffs last week. The client suddenly put the deal on ice, citing concerns about the cost of a large buildout.
“They were worried about what’s going to be the construction bill,” said Tri State Commercial Realty’s Bagdadi. “They’re at the finishing stages and they wanted to take a pause to gather their thoughts and see how they wanted to move forward.”
Retail and office tenants across the New York City market are putting lease plans on pause — or scrapping them altogether — as they wait for more clarity on President Trump’s tariffs, multiple commercial brokers said. Concerns about inflation, the cost of building materials and high interest rates are shaking up the leasing market, which has been riding a wave of good news in both the retail and office sectors over the last several quarters.
Manhattan office leasing volume reached 12.2 million square feet in the first quarter of this year, the most since the fourth quarter of 2019, according to Savills. On the retail side, the first quarter’s rolling four-quarter leasing volume, which measures volume over the last 12 months, saw 14 percent year-over-year growth, per CBRE.
That momentum could grind to a halt given the last week’s headlines.
“The overwhelming theme that I was hearing from tenants, big decision-makers, especially those that are based outside of America, was ‘we’re putting things on hold just to see how things shake out,’” said Brandon Singer of Retail by MONA.
Singer had a Hong Kong-based retail client put a lease deal on pause during a phone call late Sunday.
“We were supposed to get on the call to talk about deal terms on a deal, and they basically said, ‘We’re not doing it until this is all figured out,’” he said. “There has been a lot of hesitancy to take it across the finish line over the past week, or maybe even longer than that, since the talk of tariffs came into play.”
Last week, President Trump unveiled a sweeping tariff plan that included taxes on some countries exceeding 50 percent. The market swiftly responded, with the S&P dropping nearly 14 percent between last Thursday and Wednesday morning. On Wednesday afternoon, however, Trump announced a 90-day pause on many of the higher reciprocal tariffs that hit dozens of trade partners earlier in the day while raising duties on China to 125 percent. Wall Street quickly rebounded.
Real estate industry players, however, wondered whether the tariff whiplash would start to thaw the frozen leasing market or further fuel the uncertainty.
“This morning, it looked like the market was on the verge of a complete collapse, and this afternoon, the market’s back up again. So I definitely think there’s a sense of ‘give it a few days to play out,’” said Vasi Yiannoulis-Riva of the law firm Polsinelli. “I don’t think people are rushing to sign lease deals at the moment.”
Yiannoulis-Riva, who works on retail and office lease deals, said retail businesses are more vulnerable to tariffs in the short term because they either have to absorb the costs themselves or pass them down to consumers, who then modify their spending habits. The office market is less acute, though still tied to broader economic conditions.
“If the global economy tanks, that is going to have a big impact on the office market, and it will cause companies to maybe hit the pause button on taking more office space,” she said.
That’s already happening with some office tenants. Savills broker Gabe Marans posted on LinkedIn Wednesday about a client who pulled out of a lease deal due to tariffs.
“The trade war has officially reached real estate,” he posted.
Ruth Colp-Haber of Wharton Property Advisors said her nonprofit clients are halting plans as they digest both the tariffs and potential cuts to their funding by the Department of Government Efficiency.
But as leases expire and tenants have to pull the trigger, tariffs could push them toward turn-key spaces, widening the gap between prime Class A office properties and everything else, she said.
“The buildings that have already modernized and put the money in and have turn-key, prebuilt space they can lease, no question, are going to do better,” Colp-Haber said. “But for those that need work, the work has become so complicated and costly.”
A few brokers said they have not yet noticed a shift in the market. And tenants are inking deals, despite tariff concerns.
“We just signed a lease for a nail salon down in Tribeca and they were concerned because a lot of the equipment and supplies were coming from overseas — and they almost didn’t do it because of that,” said James Famularo, who heads the retail leasing division at Meridian. “Then they changed direction and they decided to go ahead with the lease.”
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