As global trade policies continue to shift, the consequences are being felt far beyond manufacturing floors and shipping docks. In Southern Arizona—where proximity to Mexico, robust transportation infrastructure, and a growing industrial base have made the region a rising star for logistics and manufacturing—tariffs are beginning to influence everything from construction feasibility to leasing dynamics.

More Than Trade: Tariffs and Real Estate

While tariffs are technically import taxes, their practical reach is much broader. For Southern Arizona businesses and commercial real estate users, tariffs are impacting project timelines, development costs, site selection decisions, and the pace of regional growth.

Construction Costs Under Pressure

One of the most immediate effects of tariffs is increased cost for construction materials such as steel, aluminum, HVAC components, and specialty glass—all commonly imported. In Southern Arizona, where tenant improvement (TI) allowances are already being strained by inflation and limited contractor availability, these additional costs are stretching budgets further.

Developers and landlords are faced with two options: absorb the costs or pass them on to tenants. For users building out manufacturing, warehouse, or office facilities, this often results in higher occupancy costs or delayed delivery schedules. Some projects stall entirely, particularly those that rely on pre-leased commitments or tight development margins.

Supply Chain Disruptions Hit Logistics Hubs

Southern Arizona’s appeal to logistics and warehousing operations depends heavily on consistent and timely supply chains. Tariff-induced delays—whether from customs bottlenecks, sudden changes in trade policy, or shifting sourcing strategies—can interrupt project planning and drive reluctance among prospective tenants.

Companies in the defense, aerospace, and advanced manufacturing sectors—key employers in the Tucson region—require precision and predictability. Tariff uncertainty increases project risk, discouraging investment or leading firms to overbuild in costlier areas to buffer against material shortages.

A Shift Toward Nearshoring and Regional Advantage

There is a silver lining. As companies reassess supply chains and seek alternatives to overseas manufacturing, many are turning to “nearshoring” in Mexico and the Southwestern United States. Tucson, Nogales, and other Southern Arizona markets stand to gain from this shift.

Industrial and flex-space demand has already seen upticks in response to the movement of operations closer to U.S. customers. Tariffs that make Asian imports more expensive are encouraging companies to locate final assembly, packaging, and distribution facilities in regions that balance cost, labor, and logistics—Southern Arizona being one of them.

Broader Impacts on Office and Retail

The effects aren’t limited to industrial real estate. Office users with global operations are delaying expansion decisions, while retailers—particularly those in electronics, fashion, and furnishings—face inventory volatility and price hikes. These factors can shorten lease terms, stall renovations, or alter tenant mix in retail centers across the region.

Navigating a Volatile Environment

For commercial real estate stakeholders in Southern Arizona, the path forward is complex. Tariffs can promote domestic production and regional growth, but they also introduce cost volatility and planning uncertainty. The key lies in strategic positioning.

Properties located near border crossings, intermodal facilities, and qualified opportunity zones are increasingly attractive. Developers and tenant representatives must work collaboratively to navigate construction risk, adjust lease structures, and capitalize on incentive programs that offset tariff-related challenges.

Conclusion: Strategy Over Speculation

Tariffs are more than trade tools—they are structural forces that alter where companies invest, build, and grow. In Southern Arizona, they represent both a challenge and an opportunity. Stakeholders who understand these dynamics and act proactively—through site selection, lease negotiation, and development planning—will be best positioned to thrive as global trade realigns.

For guidance on navigating the evolving real estate landscape and mitigating the impact of tariffs on your business, contact the Commercial Real Estate Group of Tucson at (520) 299-3400.