Trump 2.0: The First 100 Days | United States

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Implications for the Economy & Property

TRUMP 2.0 THE FIRST 100 DAYS

IMPLICATIONS FOR THE ECONOMY & PROPERTY

UNITED STATES

As of April 28

CONTENTS

Cushman & Wakefield

CONTENTS

WHAT DOES IT MEAN FOR OCCUPIERS AND INVESTORS?

KEY POLICY PRIORITIES

EXECUTIVE SUMMARY ECONOMY & CRE

WHAT TO WATCH

Cushman & Wakefield

EXECUTIVE SUMMARY

CONTENTS

Executive Summary

The Economy

Property

• In the first 100 days, we have observed a hard shift in economic policy under President Trump . From trade reforms to immigration, to the establishment of DOGE to tax and spending policy, the Trump Administration has taken swift and decisive action. • Given the flurry of changes, the word that dominated the marketplace in the first 100 days was uncertainty . • The U.S. economy has remained resilient thus far, but the policy uncertainty is beginning to weigh on some of the leading indicators pointing to slower growth ahead . • Recession odds are rising and short-term stagflation — meaning slowing economic growth and sticky inflation — is emerging as the new consensus for 2025. A stronger growth scenario is forming for 2026 . • The situation remains fluid with many developments still unfolding, and there may be both potential benefits and drawbacks to these policy changes that will unfold over time.

• The property sector has largely remained resilient through the first 100 days. The leasing fundamentals held steady and the capital markets recovery continued in Q1 2025. • Industrial and retail will be most impacted by the tariffs , but overall, the leasing fundamentals are expected to remain resilient. Assuming no recession, our base case calls for a near-term slowdown in occupier demand, with upside materializing in 2026. • Rising construction costs and more restrictive immigration will put upward pressure on costs and slow the construction pipeline which was already slowing going into 2025. Existing assets will likely benefit on a relative basis . • While credit and risk spreads may widen in the short-term, the gradual recovery in debt and capital markets is expected to continue and gain more pace in 2026.

CONTENTS

Cushman & Wakefield

ECONOMY & CRE

CONTENTS

Trump Bump Pares Back Stock Market Indices (November 5, 2024 = 100)

Impact on CRE

• Real estate is not the stock market. Just because the stock market goes up or down,

115

until it impacts the economy, it doesn’t necessarily mean anything for the real estate fundamentals.

110

• However, the wealth effect is important. When stocks are rising, people feel wealthier and they spend more. But it can go the other way too. A good rule of thumb: every $1 decline in stock wealth causes consumer spending to decline by 2-4 cents. • If the stock market continues to go down and stays down, this would inevitably impact consumer spending, which hits business profitability, then jobs, and eventually the CRE sector. • Normally, the stock market isn’t something we are overly focused on in understanding where property is headed. But right now, we are watching it.

105

100

DIJA NASDAQ S&P 500

Source: S&P Dow Jones Indices LLC, NASDAQ Daily Market Statistics

CONTENTS

Cushman & Wakefield

Volatility Rises… VIX Index

Impact on CRE

• The VIX Index is the implied volatility within the S&P 500 options market.

60.0

• Currently the VIX is at 28.5 as of April 23, up 89% from inauguration day. It peaked 250% above its inauguration day level on April 8. This current level is 46% higher than the long-term average (1990-present). • Volatility comes and goes quickly with bouts of uncertainty — such as August 2024 when a very weak payroll report drove higher uncertainty about the health of the economy. • The 25-year correlation between the VIX and CRE investment sales is -0.33, and the correlation with overall CRE prices (as measured by the RCA All-Property CPPI index) is -0.24. The negative implies that when volatility goes up, sales and pricing goes down (and vice versa when volatility goes down). • Every one bps increase in the VIX, if sustained, is associated with a 1.0% drop in property prices 3-6 months later. • Higher uncertainty is associated with lower investment and economic growth.

50.0

Weak Aug 2024 Job Report

40.0

30.0

20.0

10.0

0.0

Source: S&P Dow Jones Indices LLC

CONTENTS

Cushman & Wakefield

Policy Uncertainty at All-time High

Impact on CRE

• Given the flurry of changes, and particularly

the on-again off-again tariffs, policy uncertainty is at an all-time high.

500

450

• Periods of heightened policy uncertainty are often correlated with periods of weaker business investment and hiring decisions. Businesses typically pause until they have greater visibility into where policy is headed.

400

350

• The longer the uncertainty lasts, the more damaging it will be to the economy because

300

an overarching pause hits the various components of GDP, and in particular consumption and investment.

250

200

• CRE faces the same uncertainty, which may delay decision making by both occupiers and investors.

150

100

Jul-99

Jul-04

Jul-09

Jul-14

Jul-19

Jul-24

Jan-97

Jan-02

Jan-07

Jan-12

Jan-17

Jan-22

Mar-01

Mar-06

Mar-11

Mar-16

Mar-21

Nov-97

Sep-98

Nov-02

Sep-03

Nov-07

Sep-08

Nov-12

Sep-13

Nov-17

Sep-18

Nov-22

Sep-23

May-00

May-05

May-10

May-15

May-20

Global Economic Policy Uncertainty Index

Source: Baker, Bloom, and Davis, Cushman & Wakefield Research

CONTENTS

Cushman & Wakefield

Debt Spreads Will Likely Widen 10-Year Treasury Note vs. Commercial Debt Costs

Impact on CRE

• While President Trump is putting less weight on the stock market as a measure of his success, he has indicated a desire to bring down interest rates. • The decline in interest rates, however, is unlikely to meaningfully shift debt costs for CRE, as macroeconomic forces play an outsized role. • In previous recessions and periods of uncertainty, the 10-year Treasury has declined, though debt costs have either remain unchanged, or risen, reflecting the additional uncertainty. • Debt spreads initially widened in the days following the April 2 reciprocal tariff announcement but have since stabilized following the 90-day pause. • Long-term inflation expectations remain anchored, while near-term are rising. At the same time, the futures markets are pricing in more cuts — reflecting slower growth — which has translated into a 10-year Treasury market exhibiting signs that investors are pricing in a “ stagflationary- like” shock.

500

450

400

350

300

250

200

150

100

Spread, RHS

10Y Treasury

RCA Commercial Debt Costs

2011-2024 Avg Spread, RHS

Source: Federal Reserve, MSCI Real Capital Analytics

CONTENTS

Cushman & Wakefield

Even As Markets Price in New Fed Path Fed Fund Futures for December 2025 FOMC Meeting

Impact on CRE

• Coming into 2025, futures markets were expecting only one cut by the Federal Open Market Committee (FOMC), although there was a nearly equal (but smaller) probability of two rate cuts. • As of April 23, markets are now favoring three cuts despite numerous surveys and market-based measures indicating that tariffs will be inflationary in the immediate term. • The consensus appears to remain that there will be a “one - time” hit to inflation for each tariff, but that expectations will remain anchored and thus endemic inflation will not occur. • For CRE, the shifting yield curve could make some debt strategies more or less attractive. For example, if the yield curve inversion remains, borrowers are likely to take on shorter-term, fixed rate debt. However, if the yield curve un-inverts, floating rate debt would become increasingly attractive, and for risk-averse investors, longer-duration fixed rate borrowing would make sense.

40%

35%

30%

25%

20%

Probability

15%

10%

Week of Election

Week of Inauguration

Latest

225-250 250-275 275-300 300-325 325-350 350-375 375-400 400-425 425-450 450-475

Source: CME

CONTENTS

Cushman & Wakefield

Early Cracks in the Labor Markets

Impact on CRE

• Other than interest rates (arguably), no single factor is more important for real estate than jobs. • Labor markets had been cooling in 2024 across a number of metrics, and softer survey data is beginning to show more weakness forming in the labor markets. • The Challenger Report shows that layoffs are beginning to spike and average weekly hours have been declining for the last year and recently dipped to low levels. Firms tend to cut hours before laying off workers, so this measure can be a leading indicator. • Another important and timely indicator (not shown) is weekly initial claims for unemployment insurance. • The labor markets are generally holding up so far, but these leading indicators will be critical to watch going forward in gauging where demand for space goes from here.

Layoffs Announcements (Ths.)

Average Weekly Hours

300

35.0

34.9

250

34.8

34.7

200

34.6

150

34.5

34.4

100

34.3

34.2

34.1

34.0

Jul-21

Apr-20

Oct-22

Jan-21

Jan-22

Jan-23

Jan-24

Jan-25

Jan-19

Jun-19

Jan-24

Jun-24

Feb-21

Mar-23

Nov-19

Dec-21

Nov-24

Sep-21

Sep-22

Sep-23

Sep-24

Sep-20

Aug-23

May-21

May-22

May-23

May-24

May-22

Source: Challenger, Gray & Christmas, Inc.: Job Cut Report; U.S. Department of Labor

CONTENTS

Cushman & Wakefield

Demand for Space Resilient So Far Trailing Four-Quarter Net Absorption

Key Observations

• The CRE sector came into 2025 with momentum. As the table shows, demand for space was either strong or improving across most sectors. • Through Q1, despite the uncertainty, demand for space has held up. Quick recap: Office net absorption continues to be negative but is trending better and the flight to quality continues. Multifamily had another strong quarter in Q1, following the second strongest year on record in 2024. Industrial demand has clearly slowed from the staggering growth years coming out of the pandemic but remained positive in Q1. Retail’s main issue is lack of supply as this sector is 95% occupied.

2024 Q1

2024 Q2

2024 Q3

2024 Q4

2025 Q1 General Trend

Office (MSF)

-67.9

-61.3

-60.4

-50.3

-35.0

Improving

Slow (still positive)

Industrial (MSF)

891.1

876.9

896.9

881.4

851.5

Strong and accelerating

• Clearly a weaker economy will result in

Multifamily (000s)

290.0

341.7

393.0

423.3

434.1

weaker demand for space going forward, but in general, assuming a recession is avoided, the leasing fundamentals are generally expected to remain resilient.

Weakening (limited space options)

Retail (MSF)

15.9

9.5

6.5

2.0

-3.7

Source: Cushman & Wakefield Research, CoStar/Cushman & Wakefield Research

CONTENTS

Cushman & Wakefield

Capital Markets Also Resilient Through Q1

Key Observations

• Heading into 2025, there was growing sentiment in the CRE investment space.

Sales Volume Still Improving (YOY)

Pricing Infection

• Signs that a trough in markets had been reached were widespread with pricing either inflecting and rising, or declining but at slower rates. Volumes were inching upwards on a year-over-year basis. And capital and debt were flowing at much higher levels compared to 2023 to early 2024. • Although all sectors have been hit by the recent market sell-off, CRE pricing has been relatively more resilient in public markets, and during periods of uncertainty — especially those accompanied by inflation — hard assets tend to be favored. • Despite that, rising uncertainty may create a cloud over investor sentiment that derails some of the recent positive progress.

165

80%

60%

160

40%

155

20%

150

15.0%

+7%

145

-20%

140

-40%

-60%

135

-80%

130

22Q1

22Q2

22Q3

22Q4

23Q1

23Q2

23Q3

23Q4

24Q1

24Q2

24Q3

24Q4

25Q1

Jul-22

Jul-23

Jul-24

Apr-22

Oct-22

Apr-23

Oct-23

Apr-24

Oct-24

Jan-22

Jan-23

Jan-24

Jan-25

Global

U.S.

U.S. All-Property CPPI

Source: MSCI Real Capital Analytics

CONTENTS

Cushman & Wakefield

Public CRE Pricing More Resilient S&P 500 by GICS

Impact on CRE

• Public equity markets can inform implied expectations about how resilient a sector may or may not be to evolving policy conditions. • So far in 2025, real estate is the 3 rd most resilient sector, only outdone by counter cyclical sectors like utilities and health care, as well as consumer staples. • The worst performing sectors include tech, consumer discretionary and telecom. Tech specifically gets a much larger share of revenue from foreign sources, as does materials which have been the second worst performing sector on a YOY basis. • Property may benefit from recent dynamics due to its status as a real asset with inflation hedging characteristics, and private real estate for its lower volatility. • That said, the relatively hard hit to public equities is impacting allocations among investors, which could lead to some rebalancing and a pickup in redemption queues in private real estate funds.

20%

15%

10%

-5%

-10%

-15%

-20%

YTD YOY

Source: S&P Dow Jones Indices LLC. Note: *Equal weighted index.

CONTENTS

Cushman & Wakefield

KEY POLICY PRIORITIES

CONTENTS

Tariffs Will Spike, then Drift Lower U.S. Effective Tariff Rate on All Goods Imports, %

Impact on CRE

• Tariffs are clearly a big part of the reason we are seeing a spike in uncertainty and market volatility. • The initially announced reciprocal tariffs (April 2) were paused for 90 days on April 9, and tariffs on China were raised to 145%. The net impact was an increase in the overall effective tariff rate. • As of April 24, we estimate the effective tariff rate – think of it as the average tariff rate on all imports into the U.S. – to be around 25%, up from 3% before President Trump was sworn in. • These are only static assumptions, meaning they assume import volumes remain unchanged. Dynamically, we expect imports from China to plummet which will effectively lower the overall tariff rate to around 17.5%. rate will gradually come down as the economic damage mounts and as trade deals are negotiated. • Tariff policy is changing rapidly, and occupiers and investors alike should consider multiple potential scenarios to ensure adequate preparedness. • Our baseline assumes that the effective tariff

Effective Tariff Rate (C&W Baseline), %

Liberation Day (Apr 2)

25.4

90-day pause, China increase to 145% (Apr 9)

20.5

Tariffs slowly fall off in 2026 as trade deals are negotiated

17.5

July 1 st 2026: USMCA renewal

Effective tariff rate climbs from 1.5% to 3%

Trump’s second term

Trump’s first term

2015Q1

2015Q3

2016Q1

2016Q3

2017Q1

2017Q3

2018Q1

2018Q3

2019Q1

2019Q3

2020Q1

2020Q3

2021Q1

2021Q3

2022Q1

2022Q3

2023Q1

2023Q3

2024Q1

2024Q3

2025Q1

2025Q3

2026Q1

2026Q3

2027Q1

2027Q3

Source: Moody’s Analytics, Cushman & Wakefield Research

CONTENTS

Cushman & Wakefield

Stagflation Signs Already Emerging

Yield Curve Inverting “Again”

Manufacturing Sector Contracting

Confidence Falling

0.0 0.1 0.2 0.3 0.4

100 105 110 115

44 45 46 47 48 49 50 51 52

-0.3 -0.2 -0.1

90 95

100.0 100.2 100.4 100.6 100.8 101.0 101.2 The Stag The Flation

Jul-24

Apr-25

Jan-25

Feb-25

Mar-25

Apr-24

Oct-24

Jan-24

Jun-24

Jan-25

Feb-24

Mar-24

Feb-25

Mar-25

Aug-24

Sep-24

Nov-24

Dec-24

Jul-24

May-24

Apr-24

Oct-24

Jan-24

Jun-24

Jan-25

Mar-24

Mar-25

Feb-24

Feb-25

Aug-24

Sep-24

Nov-24

Dec-24

May-24

10-Year/3-Month Spread

CCI

ISM

Import Prices Rising: China

Inflation Expectations Up

Businesses Planning to Raise Prices

2 3 4 5 6 7

40 45 50 55 60 65 70 75

24 26 28 30 32 34

Jul-24

Apr-24

Oct-24

Apr-24

Oct-24

Apr-25

Apr-24

Oct-24

Jan-24

Jun-24

Jan-25

Jan-24

Jun-24

Jan-25

Jan-24

Jun-24

Jan-25

Feb-24

Mar-24

Feb-25

Feb-24

Mar-24

Feb-25

Mar-25

Feb-24

Mar-24

Feb-25

Mar-25

Aug-24

Sep-24

Nov-24

Dec-24

Aug-24

Sep-24

Nov-24

Dec-24

Aug-24

Sep-24

Nov-24

Dec-24

May-24

All Imports

1-Year Ahead

5-Years Ahead

Manufacturers

Small Businesses (rhs)

Source: Various

CONTENTS

Cushman & Wakefield

Stagflation is Now Our Base Case for 2025

Impact on CRE

• A good rule of thumb for understanding how the tariffs affect the economy: for every one percentage point increase in the effective tariff rate, real GDP growth drops by 7 bps and the CPI increases by 10 bps. • The main hits to GDP come from higher prices which results in consumers buying less, tighter margins at importing firms, and • The hit to inflation comes from higher import prices and higher input costs, some of which get passed on to consumers. • The end result is near-term stagflation, meaning weaker economic growth and higher inflation. • What does this mean for CRE? Weaker growth = weaker demand for space. Higher inflation = complicated decisions for the Fed. tighter financial conditions related to recession risks and uncertainty effects.

Stag…

…flation

3.5

3.0

3.5

2.5

2.0

2.5

1.5

1.0

1.5

0.5

0.0

0.5

-0.5

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

Real GDP, AR%

PCE, Y/Y %

Source: Cushman & Wakefield Research, Moody’s Analytics

CONTENTS

Cushman & Wakefield

Thesis for Expected Rebound in 2026

Impact on CRE

• While the outlook for 2025 has become more subdued, the stage is being set for a greater growth story in 2026. • The baseline calls for the average effective tariff rate to be notching down, which will allow inflation to decelerate creating an easier pathway for the Fed to cut. • Further, some of the impacts of President Trump’s other priorities will start to materialize more meaningfully — a marginal boost from the tax cuts extension (with some net new tax cuts) and deregulation.

Growth Accelerates

Inflation Rolls Over

3.5

4.0

H2 2025 : Fed cutting rates (concerned about growth)

Jan 2026 : Tax cuts are extended and deregulation Feb 2026 : Trump hints trade deals are being negotiated

3.0

3.5

H2 2026 : Tariffs come off or are reduced on most Mar 2026 : Fed continues normalizing policy

2.5

3.0

2.0

1.5

2.5

• This implies that property demand will accelerate in 2026 at a time when the

1.0

2.0

construction pipeline has thinned out more than was expected “pre - tariff.” Downward movement in vacancy and upward pressure on rents will begin to form across most property types and markets as a result.

0.5

1.5

0.0

-0.5

1.0

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2026Q1

2026Q2

2026Q3

2026Q4

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2026Q1

2026Q2

2026Q3

2026Q4

Real GDP, AR%

PCE, Y/Y%

Source: Cushman & Wakefield Research, Moody’s Analytics

CONTENTS

Cushman & Wakefield

Other Important Trade Measures

Impact on CRE

• Repeal of the de minimis provision, along with foreign ship fees, could dampen demand from foreign e-commerce companies who have accounted for a growing share of leasing. • Retaliatory tariffs from other countries such as China and Canada will be impactful to U.S. production of goods such as agricultural products, alcohol and machinery. By extension, logistics networks supporting the storage and export of these goods may see softer demand for industrial space. • The trade war is evolving to target duties on specific products while exempting others. Autos/parts, semiconductors and pharmaceuticals have been center stage. Tariffs on these goods will raise input costs,

Repealed the de minimis trade provision which exempted imported goods under $800

• This will lead to higher costs for foreign e-commerce companies, who have been expanding into U.S. warehouse markets via 3PL partners.

• For now, China will face this change on May 2, however there is no date for other countries.

Imposed fees on ships manufactured in China when entering U.S. ports

• Containers could be rerouted to ports in Canada and Mexico to avoid fees, but since more than 50% of ships are manufactured in China (and 95% of shipping containers), totally evading these fees will be difficult.

Retaliatory measures

• Important trading partners including, China and Canada, have implemented retaliatory tariffs on U.S. made goods, which will reduce export demand.

Targeted sector tariffs

which could dent industrial demand in manufacturing hubs and broadly hurt retailers in these sectors.

• Sector-specific tariffs on automobiles and parts will raise the cost to produce cars even domestically, as many parts are imported. Tariffs on pharmaceuticals and semiconductors have been threatened as well.

• Steel/aluminum tariffs of 25%, in addition to the broader reciprocal tariffs, will raise costs for CRE construction and further limit the development pipeline across sectors. President Trump has also threatened tariffs on copper, which is an input for electrical gear, plumbing and roofing.

Building materials

• Targeted tariffs on steel and aluminum, as well as the prospect of copper and lumber tariffs, will raise construction costs. NAHB estimates new tariffs will raise the cost of a single-family home by $9,200.

Source: Various

CONTENTS

Cushman & Wakefield

Reshoring Manufacturing Inflation-adjusted Spending on New Manufacturing Construction

Impact on CRE

• President Trump campaigned on a priority of reshoring many forms of manufacturing.

$250

• So far, President Trump has paused funding disbursements related to the Infrastructure Investment and Jobs Act and the IRA. He also wants to scrap the CHIPS Act, which was generally understood to have played an important role in the uptick in manufacturing construction under President Biden. The act has propelled almost $450 billion in commitments to build factories nationwide. • However, the Chips Act has broad support from Congress. Republican districts which were selected for factory sites have also backed the Act, so it is unlikely that material changes are made. • As mentioned before, President Trump is forming more favorable tax policy for domestic producers and using tariffs as a means to encourage reshoring. • The U.S. will need much more manufacturing space if there is going to be a significant increase in reshoring. Spending on manufacturing construction has risen markedly since 2021, especially for computer & electronics which made up almost 60% of the share in 2023.

$200

$150

$100

$50

President Trump Inaugurated

CHIPS Act & IRA

Jul-08

Jul-15

Jul-22

Oct-06

Apr-10

Oct-13

Apr-17

Oct-20

Apr-24

Jan-05

Jun-11

Jan-12

Jun-18

Jan-19

Mar-06

Feb-09

Mar-13

Feb-16

Mar-20

Feb-23

Dec-07

Nov-10

Dec-14

Nov-17

Dec-21

Nov-24

Aug-05

Sep-09

Aug-12

Sep-16

Aug-19

Sep-23

May-07

May-14

May-21

Source: U.S. Census Bureau, U.S. Bureau of Labor Statistics

CONTENTS

Cushman & Wakefield

Tax Cuts & Jobs Act Near-term Growth to Benefit

Impact on CRE

• The Tax Cuts and Jobs Act (TCJA) was first passed during Trump’s first term and went into effect January 2018. • The economy responded well. Real GDP grew by 3% in 2018 and 2.2 million net new jobs were created. Investment was also higher as a result. • It was a different time, but it is worth noting property also performed well during that period. Absorption was strong across most sectors and capital markets sales volume went on to set a pre-pandemic record in 2019. • The TCJA is set to expire at the end of 2025, but lawmakers are working diligently to extend it. • It won’t provide the same boost to the economy as the first go because it is more of an extension versus a cut. It is expected to add 0.3% to real GDP growth in 2026 and 2027.

-1

TCJA Effective Jan 1, 2018

-2

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

2017Q3

2017Q4

2018Q1

2018Q2

2018Q3

2018Q4

2019Q1

2019Q2

2019Q3

2019Q4

Real GDP (YOY % Change)

Real Investment (YOY)

Source: Congressional Budget Office

CONTENTS

Cushman & Wakefield

Tax Cuts & Jobs Act Increase in Federal Deficit (2025-2034) to Extend TCJA

Impact on CRE

• Currently, different versions of the TCJA extension are circulating in the House and the Senate. However, the latest official estimate provided at the request of Congress by the CBO suggests the full extension could cost more than $5 trillion over the next 10 years. • Several other organizations who do such estimates have similar tallies for the various options that are circulating. • The latest proposals include reducing the corporate tax rate on domestic producers, a higher SALT cap of $25,000, no tax on tips, and a higher marginal income rate on extremely high earners.

$0.2

$0.3

$0.4

$0.7

-$1.2

$0.7

$5.2

$1.3

-$1.7

$1.4

$2.2

• President Trump appears to favor the House

version, which has more spending cuts attached to it, roughly around $2 trillion.

• Regardless of what specific provisions cross the finish line, the deficit is expected to grow in the coming years. • Although a rising deficit has longer-term implications, we do not expect it to have a material impact on the CRE outlook in the near-term.

Source: Congressional Budget Office, Bipartisan Policy Center

CONTENTS

Cushman & Wakefield

More Restrictive Immigration, Period

Impact on CRE

• For CRE, more restrictive immigration has two notable impacts. First, labor force and job growth is expected to slow. The combination of weaker immigration and aging demographics in the U.S. is likely to result in weaker job growth in the coming years.

3.5

3.0

2.5

• Second, the construction pipeline will slow.

The occupations most exposed to immigration are the construction,

2.0

maintenance and landscaping sectors. Housekeeping and restaurant occupations are also disproportionately impacted. • Developers and certain CRE operators or tenants (e.g., retail, hotel) will find it harder to source workers.

1.5

Trump 2.0

Trump 1.0

1.0

0.5

0.0

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

Immigration, millions

Historical Average

Source: U.S. Census Bureau, Consensus Forecast via Moody’s Analytics

CONTENTS

Cushman & Wakefield

Immigration MSAs with Greatest Population Growth (2000-2024), by Source

Impact on CRE

• New York City, Washington, DC, Miami, Boston and Los Angeles would have recorded population declines without international migration over this period. • Not on the chart, but among MSAs with a population of at least 1.25 million, San Francisco, Chicago, Silicon Valley, and Milwaukee also would have recorded population declines without international migration. International migration offset population declines in a few cities including Cleveland, Detroit and Pittsburgh. • According to Burning Glass Institute, undocumented immigrants in California, Texas and Nevada account for 12.0%,

70%

60%

50%

40%

30%

-1

20%

-2

-3

10%

-4

10.4% and 9.9% of the population, respectively, versus 7.2% nationwide.

-5

• Labor challenges associated with undocumented immigration will have localized effects, especially for certain sectors.

Other Factors* (Millions) International Migration (Millions) International Share of Total Population Change (rhs)

Source: U.S. Census Bureau. Note: Ranked by total population change from left to right.

CONTENTS

Cushman & Wakefield

Immigration Occupations With Highest Share of Undocumented Workers

Impact on CRE

• Talent attraction and retention has remained a critical element of the latest cycle with widespread reporting of labor shortages in sectors important for CRE. Further challenges in the labor market are likely.

Driver/sales workers and truck drivers

5.5%

11.9%

Childcare workers

10.3%

14.5%

U.S. Southern Border States

Pipelayers, plumbers, pipefitters, and steamfitters

8.9%

17.1%

Electricians

7.1%

19.0%

First-line supervisors of construction trades and extraction workers

10.0%

20.7%

Operating engineers and other construction equipment operators

7.5%

21.3%

• Specific occupations have outsized reliance on undocumented workers, many of which are concentrated in the construction, retail, hotel and other services sectors (like childcare).

Production workers, all other

10.6%

21.7%

Food preparation workers

11.0%

23.6%

Janitors and building cleaners

12.7%

25.6%

Welding, soldering, and brazing workers

10.5%

27.4%

Industrial truck and tractor operators

11.7%

27.5%

Chefs and head cooks

15.0%

27.8%

Packers and packagers, hand

18.1%

28.8%

• Fewer workers showing up to work (employed but not at work status in the BLS House Survey) and a reduction in labor supply will be the immediate impacts of President Trump’s policy. Labor supply will likely remain a key challenge going forward, with more unpredictability.

Dishwashers

14.9%

29.3%

Grounds maintenance workers

23.5%

40.1%

Construction laborers

28.2%

44.8%

Maids and housekeeping cleaners

26.4%

44.9%

Carpet, floor and tile installers and finishers

26.6%

48.4%

Roofers

37.2%

49.4%

Painters, construction and maintenance

34.3%

53.2%

Misc. ag workers

46.6%

57.5%

Drywall and ceiling tile installers, and tapers

49.5%

65.6%

0% 10% 20% 30% 40% 50% 60% 70%

Source: Gad Levanon/Burning Glass Institute. Calculated using CBO, “The Demographic Outlook: 2024 - 2054.” Baker. B and Warren R. April 2024. U.S. Department of Homeland Security: Office of Homeland Security Statistics. ‘Estimates of the Unauthorized Immigrant Popula tion Residing in the United States: January 2018- January 2022’. U.S. Census Bureau: Population Estimates Program, 2010 -2023. Van Hook, J. Gelatti, J., Ruiz Soto, A.G. ‘A Turning Point for the Unauthorized Immigrant Population in the United States’, Migration Policy Institute, September 2023.

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Deregulation Regulatory Activity From Inauguration Day to January 17 (Year 4)

Impact on CRE

• On January 31, President Trump issued an executive order that “for each new regulation issued, at least 10 prior regulations be identified for elimination.”

Final Rules

Final Rule Costs

Paperwork Hours

• Reduced regulation is generally thought to create a mix of positives and negatives.

Biden (2021)

1,167

$1.8T

356M

Trump (2017)

1,313

$112.3B

357M

• The positives: Allows businesses to operate more freely and can have the effect of stimulating the economy and creating more jobs. Also eliminates restrictions for new businesses to enter the market, which can bring on more competition and reduced prices.

Obama (2009)

1,514

$493.6B

316M

• The negatives: Can lead to ethically

questionable business practices and make it harder to prevent monopolistic practices.

• Industries most likely to benefit from deregulation include energy/fossil fuels, financial services, healthcare and technology/AI.

NFIB Index - Largest Problem is Government Regulation

Source: American Action Forum “Week in Regulation”

CONTENTS

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DOGE Federal Employment (Millions)

Impact of CRE

• The Department of Government Efficiency has been tasked with removing waste, fraud and abuse, and generally reducing the size of government. • Its initial goal was to reduce spending by $2 trillion (over an unspecified period). But before President Trump was inaugurated, the goal was softened to $1 trillion. • So far, DOGE has laid off 120,000 federal workers and an additional 77,000 have taken buyouts. We assume that federal civilian employment will decline by 400,000, or roughly -13.5%. A reduction of the federal workforce by 10% would result in ~$350 billon in savings over 10 years, so the cost savings from this could be significant. • On Feb. 7, the NIH announced a 15% cap on ”indirect funding,” a move expected to save $4 billion in 2025. Cuts to research grants have also been announced. The uncertainty around these cuts affects investor sentiment and funding. Life sciences companies looking to expand into new space may need to stay put as capital becomes constrained.

3.1

3.0

2.9

2.8

2.7

2.6

2.5

2.4

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2026Q1

2026Q2

2026Q3

2026Q4

2027Q1

2027Q2

2027Q3

2027Q4

2028Q1

2028Q2

2028Q3

2028Q4

2029Q1

2029Q2

2029Q3

2029Q4

2030Q1

2030Q2

2030Q3

2030Q4

December 2024 Baseline

March 2025 Baseline

Source: Moody’s Analytics, Cushman & Wakefield Research

CONTENTS

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GSA Current GSA Portfolio (msf)

Key Observations

• The GSA leases 173.5 msf of space, of which 149.0 msf is office space.

• Some leases in GSA’s data show that the expiration date is in the past. These are the minority (far right on the chart) and suggest the government is still in space where it no longer has an active lease. In total this is 2.1 msf. termination options in them, however those termination dates are in the past, so this option has expired. (Second set of bars on the right.) • 55.9 msf of active leases have termination dates that differ from the expiration date, and they are in the future, meaning they are still active options. Of the 55.9 msf, 47.8 msf is in office space specifically. Only 32% of federal GSA leases have active early termination options. • The largest category, 76.1 msf, is made up of active leases, however the termination date is identical to the expiration date. • Another 39.6 msf of active leases have

Term Date = Expr Date, Term Date in Future

Term Date = Expr Date, Term Date in Past

Term Date ≠ Expr Date, Term Date in Future

Term Date ≠ Expr Date, Term Date in Past

Office Non-Office

Source: GSA January 2025 Leasing Dataset, Cushman & Wakefield Research

CONTENTS

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GSA Cities With Most Exposure

Impact on CRE

• Most of the impact on CRE markets will come through two main channels: execution

Most Exposed to Early Terminations on Leased Real Estate (msf)

Most Exposed to Lease Rollovers During Trump 2.0 Term (msf)

of active early termination options or allowing an expiring lease to terminate without renewal.

San Antonio Baltimore San Diego Los Angeles Not in any MSA Denver Houston Miami Chicago Philadelphia Atlanta Dallas/Fort Worth New York City Kansas City Washington, DC

Jacksonville Phoenix Not in an MSA Cincinnati Philadelphia Pittsburgh Chicago Miami Virginia Beach Seattle Los Angeles Atlanta Kansas City New York City Washington, DC

• Across the GSA leased portfolio, 32% of all leases nationwide have an active early termination clause, however in Washington, DC, this share is only 8.0%. • The leased and owned portfolio is highly concentrated in 29 cities — for each parts of the portfolio, 29 cities account for 75% of total GSA exposure. Washington, DC accounts for over 25% alone. • Our analysis shows that if early terminations are exercised, the average increase in office vacancy in the top 29 markets would be 0.2% (0.8% for DC). • If all leases that are expiring during Trump 2.0 do not get renewed, the average increase in office vacancy would be 0.4% for the top 28 markets outside of Washington, DC. In DC, the increase would be 12.0%. This scenario is unlikely as federal RTO mounts.

Office Non-office

Non-Office Office

Source: GSA January 2025 Leasing Dataset, Cushman & Wakefield Research

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Privatization of GSEs GSE Share of Multifamily Lending Activity

Impact on CRE

• Fannie and Freddie have a capitalization of a bit less than $150 billion, far short of the ~$300 million capitalization required to exit conservatorship. • The GSEs have been a major player in multifamily financing over the past decade. They represented over half of all multifamily lending activity from 2015-2024 and continue to act as a “lender of last resort” for the multifamily industry, as indicated by the 10% jump in market share during the pandemic. • Ultimately, privatizing the Agencies will require coordination across all three branches of government, alongside the private market. Stability in the financial system and the reduction in government involvement will need to be balanced delicately to ensure a smooth transition out of conservatorship. • The latest guidance from the administration is to focus on reducing fraud and promoting affordability, instead of privatization. Privatization is years away if it does become a higher priority.

2024

45%

2023

47%

2022

34%

2021

36%

Recessions (GFC/Pandemic)

59%

Pre-Pandemic (2017-2019)

48%

Pre-Conservatorship (2000-2007)

21%

0% 10% 20% 30% 40% 50% 60% 70%

Source: MSCI Real Capital Analytics

CONTENTS

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Other Policy Priorities

Releasing Federal Lands

• The administration launched a task force to find underutilized federal lands that the government could sell for private residential development.

• Theoretically this could provide a source of new supply to residential real estate, though most of the owned federal land is in remote areas where housing shortages are less acute. As a result, the impact on residential property markets would likely be muted.

Fed Independence

• President Trump indicated in December 2024 that he would not try to fire Fed Chair Jerome Powell. But amid financial market instability, Trump has called on Powell and the Fed to lower interest rates. • The Fed has a long history of independence from Congress and the President; historical precedence shows that when central bank independence is breached, inflation and financial instability tend to accelerate, which would be a negative for CRE activity.

Health & Human Services:

• The healthcare sector is bracing for changes at the Department of Health and Human Services and the Centers for Medicare and Medicaid Services. Further cuts to provider reimbursements will impact their already thin margins and their ability to move into or expand into new space. However, the sector has high occupancy rates and should be able to weather this turbulence. • Cuts to Food and Drug Administration staff have injected further uncertainty in the life sciences sector. Potential delays to drug approvals can impact a company’s plan for cGMP space. Data Centers • Trump’s “Removing Barriers to American Leadership in AI” order, following Biden’s “Advancing U.S. Leadership in AI Infrastruc tur e” order, is expected to positively impact the data center industry. Timelines and directives in Biden’s order are being followed, and Trump’s order a ims to eliminate policies that could hinder future AI development. • Hyperscale data center operators stand to benefit the most from Biden & Trump’s executive orders concerning AI infrastructure . A $500B AI infrastructure fund, called Project Stargate, was announced as a partnership between OpenAI, Oracle, SoftBank, and MGX following the two executive orders. Most recently,16 potential data center development sites on federal land were released by the DoE on April 3.

CONTENTS

Cushman & Wakefield

WHAT TO WATCH

CONTENTS

Inflation Expectations Consumers Worried About Prices

Impact on CRE

• Consumer inflation expectations have surged in the last month as tariff talk has escalated. • Notably, consumers expect that inflation will be higher — not just immediately, but also over the next five years. • Households take into account rising costs in their purchasing decisions; for example, we saw a surge in automobile purchases ahead of the tariffs since consumers expect prices to rise imminently. • Tariffs will soon send consumer prices higher, leading to more pessimistic sentiment and potentially less retail spending. announcements were already on the rise, and a consumer pullback will only dampen retail CRE demand further. • Industrial CRE demand will also take a step back as supply chains recalibrate to the more subdued spending outlook. • Retail store closures and bankruptcy

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24

Apr-19

Oct-19

Apr-20

Oct-20

Apr-21

Oct-21

Apr-22

Oct-22

Apr-23

Oct-23

Apr-24

Oct-24

Apr-25

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24

Jan-25

One Year Ahead

Five Years Ahead

Source: University of Michigan

CONTENTS

Cushman & Wakefield

Jobless Claims Initial Claims for Unemployment Insurance (Ths.)

Impact on CRE

• Job layoff announcements have been creeping higher recently, but the number of Americans filing for unemployment insurance has not increased materially, yet. • The jobless claims may be lagging for a variety of reasons, including the fact that most people do not file until their severance expires. Americans also have more savings than in most job cycles, so they may not feel as much urgency to collect unemployment. • The hiring rate has slowed relative to the past several years, and job gains are highly concentrated in a few industries. This alone will weigh on demand for CRE across a variety of uses, but is not alone a predictor of recession. Not until we see a decisive upward trend in jobless claims should we expect widespread job losses and rising unemployment rate. Jobless claims can serve as a useful leading indicator to watch for breaks in the labor market.

260

250

240

230

220

210

200

Source: U.S. Department of Labor

CONTENTS

Cushman & Wakefield

WHAT DOES IT MEAN FOR OCCUPIERS AND INVESTORS?

CONTENTS

What it Means for Occupiers & Investors

Occupiers

Investors

• Maintain a long-term perspective: Continue to implement workplace strategies with a focus on long-term objectives.

• Focus on the investment horizon: Prioritize long-term real estate investments, as consistent value appreciation typically occurs over time. Secular themes are still relevant. • Take advantage of market volatility: Overlook short-term market fluctuations and strategically acquire assets from sellers motivated by uncertainty. • Interest rates are unlikely to return to pre-pandemic levels: Seize opportunities when long-term debt dips below historical averages and strategically allocate capital. • Capitalize on short-term rate movements: The Fed is likely to continue normalizing rates, with more cuts if economic conditions weaken. Leverage these changes to optimize your investment strategy.

• Leverage tariffs and uncertainty: Use the current environment of tariffs and uncertainty to your advantage in shaping business strategies and negotiations. Use term and credit to your advantage. • Regardless of tariff impacts, it is essential for manufacturers to diversify supply chains as a prudent risk management strategy. Operational risk can be diversified through strategic use of 3PLs. • Large corporations are likely to capture increased market share post uncertainty. Position your organization for growth by preparing for future opportunities. • Take a proactive approach by targeting high-quality assets and locations . As the availability of premium options becomes limited and uncertainty fades, it will become an increasingly competitive market. • Re-evaluate and re-assess your real estate strategy in alignment with your business outlook. Determine your organization’s risk profile and tailor your approach accordingly to optimize space utilization.

• Consider CRE as a hedge: During periods of uncertainty, especially with higher inflation, real income-producing assets are favored.

• CRE subtypes matter : CRE has a myriad of necessity-based asset classes (residential, grocery-anchored retail, healthcare) that often outperform during weaker growth environments.

• Prepare for more expensive construction fit-outs in the immediate term , and fewer new construction options in one or two years.

• Re-assess investment strategy: Evaluate your risk profile and begin executing an updated strategy tailored to current market conditions.

CONTENTS

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