The past few weeks have been particularly rocky for the world’s economy since Donald Trump announced his proposed tariff rises on the rest of the world. It can be difficult to predict the exact impact of these tariffs, partially because the parameters and timelines keep changing. We have, for example, seen changes in when tariffs will come into force, as well as how much they will be for each country, leading to high levels of uncertainty for everyone.
As with almost every market in the UK, the commercial unit market is very connected to the rest of the world. It is not only changes in the UK economy that can have an impact on our commercial unit market, but there are also many factors, including other economies from around the world, the price of raw materials, and future commercial strategies from other governments internationally. In other words, as much as we wish to be – or don’t wish to be, we are all connected.
The tariffs proposed and implemented by Donald Trump have had an impact on every country and trading block around the world, which, of course, is having – and will have an impact on commercial property in the UK.
One of the biggest impacts that we are seeing at the moment in relation to the tariffs – and how the world’s economies are reacting, is the uncertainty of everything. With Trump having already changed his mind on several occasions, it can be difficult for markets to decide on a strategy to deal with them as they are unsure of what will be coming from one day to the next.
It is important, therefore, for governments and businesses to protect themselves as much as possible from this unpredictability. For some, this means turning away from the USA and looking to work more with markets from other places – the EU or China, for example.
What we do know, is that we can never be sure of what to expect concerning tariffs, but in this article, we are going to have a look at some of the factors that could be impacted by them in the commercial unit market, as well as what can potentially be done to minimalize potential damage.
Cost of Imported Parts, Interest Rates, and Inflation
One of the main reasons for implementing tariffs on products, parts, and materials entering the United States of America is to encourage them to be produced within the country, growing manufacturing. This is likely to impact international trade by raising the price of products, parts, and materials from outside the USA if they are imported, potentially reducing demand. Of course, this impacts the prices within the USA more than the rest of the world but, considering the amount of travelling that the components of a car, for example, do, it can have repercussions around the whole world.
This is already having an impact on a number of industries in the UK. Many manufacturing businesses that rent warehouses and workshops, for example, may be feeling changes in their demand.
With the inevitable price rises that we are beginning to see, we will also be most probably fighting rising inflation as a reaction to the rising tariffs. It is almost always the case that when there is rising inflation, the Bank of English increases interest rates – great for savers, but making mortgages higher, and generally reducing the amount of money that people are willing to spend. In turn, this has an impact on businesses of all kinds, and, consequentially, the commercial unit market. It can be harder to secure loans and will usually result in a dimming of the domestic and commercial property markets.
It seems that the best way for businesses to protect themselves from this – and for the government to help safeguard the country is to seek business from other places outside of the USA – whether it is within the UK or other countries. It is worth bearing in mind that many businesses will be in a similar situation.
Of course, when it comes to renting commercial units, the healthier the economy, generally the healthier the businesses, and, the healthier the commercial unit market. It can impact businesses across the world, particularly those in logistics and manufacturing.
Raw Materials and Construction
Another area that can be significantly impacted by these tariff rises is construction. The cost of raw materials such as steel and timber is likely to rise, especially as the majority of them are imported. This, therefore, is likely to impact the construction of everything from residential property to commercial unit construction, making it more expensive to build.
This can lead to smaller profits for the construction companies and potentially a slowing down of the rate of construction. It could also mean a rise in the cost of buying a commercial unit. This could result in more businesses renting a commercial unit for their office space, retail unit, or warehouse, for example.
By renting a commercial unit, the cost is far lower in the short term, especially for smaller businesses or fledgling companies taking their first steps into their chosen market. It is much less of an initial investment, meaning that businesses can rent the best commercial unit for them at any given time, and enable their base to grow with them.
Market Uncertainty
Regardless of the tariffs that will or will not be brought in, one effect that we are already beginning to see is market uncertainty. This can have a great impact on businesses across the spectrum. If you are unable to predict what will happen with a business in the next few months, it is impossible to make investment decisions, take risks for extra growth – or indeed take your foot off the accelerator a little if you know it is going to be tough.
Many businesses are having to move forward more cautiously than expected just because of the market uncertainty.
It is obvious that the whole world is likely to be impacted (by different amounts) by the implementation or not of extra tariffs by the United States of America, and commercial property is no different. It seems that at the moment the most constructive thing that businesses can do is to seek to do business within their own countries and businesses in other countries that are not the USA. This is, of course, easier for some businesses to do than for others.
If you are a business looking to rent a new – or first – home, why not take a look at the commercial units that we have to offer here at Boxpod? Likewise, if you have a commercial unit that is empty and you are hoping to find tenants, take a look at our website to see how we can help you today.