The Hidden Cost of Tariffs: What to Watch Within Your Shopping Center Rent Roll

Multi-tenant retail has remained one of the most resilient asset classes over the past 12 months—investor demand is strong, capital continues to pursue quality products, and pricing has largely held firm. That said, consistent themes emerging from conversations with active investors and developers: slower rent collections in certain pockets, tariff-related cost pressures impacting tenants, and delays in lease execution due to prolonged negotiations or tenant hesitancy.

 

Here’s what to know and how to stay ahead as evolving tenant dynamics and cost pressures begin to reshape landlord strategies and lease structures.

 

What do global tariffs have to do with your property?

Increase Cost of Goods Sold (COGS)

Tariffs have directly raised the cost of imported merchandise—particularly in categories like apparel, electronics, furniture, toys, tools, and household goods—with apparel prices alone up 17%, placing outsized pressure on retailers with thinner margins, such as discount chains.

 

Price Increases Passed to Consumers

To offset tariffs, many national retailers have raised prices 5–15%. Walmart, Nike, and Adidas have all pointed to tariffs as a key reason for these increases. Target’s Q1 2025 sales dropped 2.8%, with leadership citing “massive costs” as a tradeoff for not raising prices. Whether passed on to consumers or absorbed internally, tariffs reduce competitiveness and impact store traffic.

 

Supply Chain Restructuring

Tariffs are accelerating the shift away from China toward alternative sourcing and domestic production—a transition that takes time, resources, and often adds short-term costs, particularly for smaller retailers.

 

Store Expansion or Contraction Plans Shift

Rising trade costs and uncertainty have caused many retailers to pause on growth. Some delay leases or new locations; others downsize or consolidate to preserve margins. These changes are most common in heavily tariff-affected categories like soft goods and home goods. As retailers pull back, landlords face slower lease-up of new construction and more cautious tenant commitments.

 

The Ripple Effect from Tenants to Landlords

Rising costs and shifting consumer behavior are putting pressure on both retail tenants and landlords. In price-sensitive segments, where slower foot traffic is already a concern, retailers face shrinking profit margins unless they raise prices — a difficult proposition in a competitive landscape. Longer lead times and elevated freight expenses further strain operations, often forcing tenants to cut costs in ways that affect store performance and rent reliability. In response to these mounting pressures, some retailers are requesting rent relief, downsizing their footprints, or seeking lease renegotiations. There’s also a growing preference for shorter lease terms or additional tenant improvement allowances to help offset expenses. These dynamics are contributing to slower space absorption and increased lease renewal risk, challenging landlords to remain flexible in an evolving market.

 

Impact on Landlord Performance

The effect of tenants create risk in the Net Operating Income for landlords if tenants are unable to meet rent obligations. Lenders and buyers may underwrite more conservatively for centers with heavily exposed tenants as they evaluate tenant durability.

 

How Landlords Can Be Proactive About Tariff Measures

Deloitte’s 2025 Retail Outlook found that over 60% of retail execs rank tariffs and trade disruptions among the top three risks through at least 2026. Properties anchored by essential, service-oriented, or locally sourced tenants are more insulated, whereas soft goods retailers face more volatility.

 

How to stay ahead:

 

• Know your tenants exposures
• Review your rent roll and identify tenants with heavy import-dependent models (e.g., apparel, electronics, furniture).
• Modeling their financial resilience under pressure can help identify vulnerabilities early.
• Shifting and focusing on service-oriented tenants—like healthcare, fitness, salons, and food—is a key strategy, as they rely less on global supply chains.

 

It’s important to stay in tune on where your asset stands in the current market. We would be glad to put together a full Asset Evaluation to ensure your investment still aligns with your current goals and stay ahead. Feel free to contact me directly.