Parkview Insights: The Implication of Tariffs on CRE Lending
- Parkview Financial
- 14 hours ago
- 5 min read
Parkview Insights | Market Trends & Updates
Paul Rahimian, Founder, CEO | Ted Jung, Chief Credit Officer | Dhaval Parikh, Managing Director, Head of Capital Raising & Investor Relations | April 2025
Dear Partners,
During our 4Q2024 commentary, we anticipated that 2025 would be a "choppy" year, and indeed, this has been validated by heightened volatility throughout 1Q2025, which was further exacerbated on April 2nd following the announcement of sweeping new tariffs, referred to as “Liberation Day”.
Throughout the first quarter of 2025, the U.S. imposed significant tariffs on steel and aluminum imports, increasing the rate to 25% for nearly all countries, aiming to protect domestic industries. However, the latest tariff developments expand these trade barriers even further, introducing a new 10% baseline tariff on imports from multiple trading partners, alongside additional tariffs ranging from 11% to 50% on key nations including Vietnam, and members of the European Union. And, more recently, bilateral tariff rates with China now between 80% and 125%.
Unsurprisingly, major trading partners—including Canada and the European Union—responded swiftly, imposing their own retaliatory tariffs on U.S. goods. This escalation has intensified global trade tensions, fueling concerns about a potential trade war, destabilizing financial markets, and heightening the risk of an economic downturn.
The repercussions of these policy shifts have already materialized. In the days following the April 2nd tariff announcement:
The S&P dropped 9.1% in one week - the steepest weekly drop since March 2020.
The 10-year Treasury fell below 4%, as capital flight into more stable investments accelerated.
U.S. Dollar dropped sharply potentially resulting in higher inflation
Despite a partial market rebound, volatility and uncertainty persist. The commercial real estate sector usually reacts more slowly to macroeconomic changes, but the current trajectory of trade relations suggests inevitable adjustments in real estate fundamentals. Below, we present Parkview’s initial thoughts on the anticipated effects for commercial real estate. However, we caution that the market is highly dynamic at the moment. We are uncertain how long the current turmoil due to tariffs will continue, but we believe the "aftershocks" will last a long time, even if tariffs were completely reversed today. The damage to the US's reputation in the global marketplace has been done, and we are seeing the bond market react accordingly. Treasuries are increasing while the world grapples with tariffs, and uncertainty is rising. Traditionally, US treasuries were a safe haven, and in times of distress, the world would buy US treasuries, leading to lower rates. However, the opposite is happening now, indicating a shift in market behavior. Consequently, we believe the probability of a recession has increased materially, prompting us to proceed with heightened caution.
Sincerely,
Paul Rahimian
Founder and CEO of Parkview Financial
Commercial Real Estate Fundamentals
The economic uncertainty stemming from trade disputes will likely curb rent growth across most property types and markets. A broader economic slowdown may lead to employment and wage stagnation, discouraging corporate expansion and reducing consumer spending power—both of which affect demand for commercial spaces.
Simultaneously, rising construction costs—exacerbated by tariffs on imported raw materials—could hinder new developments, tightening overall supply. While it remains uncertain whether supply restrictions or weakened demand will play a more dominant role, given the evolving environment, Parkview will exercise higher selectivity in new originations, adopting more stringent underwriting standards. A favorable scenario would involve constrained supply due to tariffs, while demand eventually rebounds.
Potential Federal Reserve Policy Response
To mitigate the adverse effects of tariffs, The Federal Reserve may consider cutting interest rates if the ongoing trade war continues to erode US economic confidence, consumer confidence, and leads to deeper job losses. Lower interest rates would make financing more affordable, providing an easier path for property owners to refinance existing debt and/or finance new transactions. Lower interest rates could also lead to higher property valuations due to lower capitalization rates.
Of course, the Federal Reserve would need to balance any cuts with inflationary pressures. Assuming inflationary pressures continue to be at the forefront despite slower economic growth, we could enter a period of stagflation where stagnant economic growth, high inflation, and high unemployment occur simultaneously. If we do see high inflation and higher unemployment simultaneously, the Federal Reserve may be caught in a bind. This would pose serious challenges for commercial real estate.
Investment Opportunities
Given heightened uncertainty, we believe it’s more important than ever for real estate investors to target resilient property sectors and investments that showcase downside protection. Even if we enter a period of disruption or stagflation, we strongly believe that investors will have opportunities in multifamily housing, which consistently demonstrates strong long-term fundamentals and enduring demand. In addition, across real estate lending, senior “bridge” lending opportunities will be a key tool to address near-term needs for borrowers in a dynamic market. These positions provide shorter timelines and clearer pathways to stabilization and exit, allowing real estate lenders to make prudent loans that mitigate risks while optimizing returns.
Conclusion
In this period of uncertainty, Parkview remains steadfast in its commitment to navigating the complexities of the current economic climate by sticking to its well-defined investment thesis. While there are a multitude of potential economic outcomes in the months ahead, we believe that there is a strong likelihood that transaction volume is expected to remain subdued in the near-term as buyers and sellers navigate the search for a “clearing price.” Parkview is responding with a highly conservative stance on underwriting and new originations and prioritizing proactive management of existing positions to mitigate potential impacts on rents and occupancy relative to our loan basis.
We deeply appreciate your partnership and remain committed to monitoring developments closely and providing you with our views in a timely manner.
By Paul Rahimian, Founder, CEO, Ted Jung, Chief Credit Officer, Dhaval Parikh, Managing Director, Head of Capital Raising & Investor Relations
Learn more about our lending programs and market insights, www.parkviewfinancial.com
This article is intended for general information purposes only and is not intended to offer investment advice or recommend investments. This article is not an offer to sell or a solicitation of an offer to buy securities. Parkview Financial 2015 Fund, LP (“Parkview Financial”) offers investments to qualified investors only under the terms of a Confidential Private Offering Memorandum (the “Memorandum”) that may be made available to prospective investors in accordance with applicable federal and state securities laws. The Memorandum contains information regarding the business of Parkview Financial and the risks of making an investment in Parkview Financial. Prospective investors are required to read the Memorandum and acknowledge the risks of investment before making any investment in Parkview Financial.
ABOUT PARKVIEW FINANCIAL
Parkview Financial is a direct private lender specializing in commercial and residential real estate financing. Parkview provides short-term bridge and construction loans secured by first trust deeds to sponsors throughout major markets in the United States. Since inception, Parkview has successfully executed more than $4 billion in financing for multifamily, retail, office, industrial and mixed-use projects with executed loans ranging from $5 million to $300 million.
Headquartered in Los Angeles and with offices in New York and Las Vegas, Parkview has grown exponentially since it was founded in 2009 by CEO Paul Rahimian. Parkview has earned an unparalleled reputation within the commercial real estate industry as one of the most respected private lenders in the nation. This has been accomplished through Parkview’s proven ability to provide fast, creative financing solutions to borrowers who need certainty of execution. Fortified with an experienced team of in-house experts, Parkview is able to be nimble and creative even when it comes to some of the most challenging projects.