Geopolitical risks, including changes in trade policy and regulatory shifts, can significantly impact the performance, stability, and long-term growth of real estate investment trusts (REITs).
Research shows that geopolitical uncertainty can impact REIT returns, and may contribute to a higher-for-longer interest rate environment that can create challenges for the real estate sector. Now and into the future, REITs must be prepared to proactively identify, assess, and manage these risks to protect their assets, secure investor confidence, and pave the way for future growth.
REITs and geopolitics
Rising tensions between nations, trade disputes, sanctions, and economic uncertainties can create a volatile environment for REITs, especially those with international holdings or reliance on foreign capital. Such instability can lead to capital flight, currency fluctuations, and changes in investment flows, all of which influence property values and rental income.
Similarly, trade tensions and sanctions can disrupt supply chains, increase construction costs, and delay development projects. Additionally, political unrest or conflict in key markets can lead to decreased demand, higher vacancy rates, and reduced property valuations.
A spotlight on regulatory risk
Regulatory environments are also in a constant state of flux. For REITs, this means navigating a complex web of tax laws, zoning regulations, environmental standards, and housing policies that can change unexpectedly.
The recent passage of the One Big Beautiful Bill Act, signed into law in July 2025, exemplifies this dynamic, bringing with it new provisions that have significant implications for businesses and individuals alike. The legislation introduces tax cuts, incentives, and increased federal spending around border security, defense, and energy production.
It also includes amendments to the Internal Revenue Code, which may alter tax obligations, eligibility criteria, and compliance requirements, potentially influencing investment strategies, cash flow, and overall financial planning. For example, modifications to tax rates, deductions, or credits could reduce certain benefits or create new complexities, requiring stakeholders to reassess their tax positions and adapt their financial approaches accordingly.
Similarly, new zoning laws or land use restrictions can limit development opportunities or require costly adjustments to existing properties. Environmental regulations, including sustainability mandates and climate resilience standards, are also becoming more stringent, requiring REITs to adapt portfolios accordingly. Failure to comply with these regulations or to anticipate upcoming changes can result in financial penalties, reputational damage, or loss of tax advantages that are critical to the REIT structure.
Opportunities to build resilience amid geopolitical and regulatory change
Given the complexity and potential severity of these risks, REITs must adopt a strategic, proactive approach to risk management. The following five steps can help your organization do so:
