How Geopolitical Risk Is Reshaping Commercial Real Estate Right Now — And Where the Opportunities Still Are

The world changed, and commercial real estate investors who aren't paying attention are about to get caught flat-footed. Military action in Iran has created a level of macro anxiety that is already rippling through capital markets, travel patterns, and construction costs. In this episode of The Commercial Dept podcast, Brad and I worked through every major CRE sector — where things are getting ugly, and where smart money can still find a foothold.

This is not political commentary. This is a practical look at what's happening on the ground and what it means for your portfolio.

The Geopolitical Backdrop: What It Actually Means for CRE

I want to be clear: we're not here to debate the politics of what's happening in Iran. That's not our lane. What is our lane is what that kind of global disruption does to commercial real estate — and the short answer is that it creates uncertainty, and uncertainty makes everyone more conservative.

Banks get nervous. Lenders tighten standards. Buyers pull back. Sellers who were on the fence decide to hold. That dynamic alone creates both risk and opportunity, depending on which side of the equation you're on.

The geopolitical risk and commercial real estate relationship is straightforward: any kind of global disruption raises the cost of capital, dampens demand for certain asset classes, and forces a repricing of risk. The question is whether that repricing creates buying opportunities for investors with cash reserves and patience — and in several sectors, it does.

Interest Rates and Lending: Expect Unpredictability

Before this latest escalation, the Fed was signaling a gradual move toward lower interest rates. That trajectory is now uncertain. When Brad ran the numbers the morning we recorded this episode, mortgage rates were sitting at 6.46% — up noticeably from where they were just two weeks prior when they were borderline 6%.

That jump matters. And here's what it signals:

• Banks are getting more conservative with lending specifications

• Risk tolerance among lenders is dropping

• Projects that might have gotten funded two months ago are now getting a harder look

If you're pursuing financing right now, you need to have every duck in a row. Your financials need to be clean, your exit strategy needs to be clear, and you need to understand that the lender's threshold for risk has moved. Institutional capital is going to be harder to access in this environment.

That said — if you are a cash buyer in commercial real estate, this is actually your moment. Less competition, more negotiating leverage, and sellers who are anxious to move. If the numbers work for you and you're not rate-dependent, this environment creates real opportunity.

Tourism and Hospitality: High Risk, Especially in Orlando

As a Central Florida broker, this one hits close to home. Tourism has been the backbone of the Florida economy, and what we're seeing is a pullback on two fronts: international travel cooling off due to global anxiety, and domestic travelers becoming hesitant to fly.

What you do get is regional road-trip traffic. Someone from Georgia or South Carolina is probably still going to load up the car and drive to Florida for a long weekend. But the international visitor? The corporate convention attendee who flies in from Seattle? Those numbers are declining.

The segment of hospitality that's most at risk right now is business and conference hotels— properties that were built to support convention centers and corporate travel. That market was already struggling since COVID shifted corporate events toward hybrid or fully virtual formats. A company that used to send 20 employees to a conference now sends two and puts the rest on a video call. You're immediately short 18 room nights. Now layer a wartime travel reluctance on top of that, and the conference hotel model is in serious trouble.

Leisure and resort hotels are more resilient — not immune, but they're drawing regional drive-to visitors who don't need to get on a plane. The bigger, name-brand leisure properties have held up better and should continue to outperform.

For hotel owners whose properties are on the margins: now is the time to be honest about your numbers and think through your exit strategy. We're likely going to see some trading in the hospitality space as properties that were already struggling get hit again.

Adaptive Reuse: Turning Struggling Hotels Into Something That Works

One of the things I love about commercial real estate is that underperforming assets can be repurposed. Hotels are actually well-suited for [adaptive reuse in commercial real estate] because the infrastructure is already there — the plumbing, the electrical, the density permissions.

Some of the most practical conversion paths for distressed hotels right now:

1. Hotel to multifamily: Add full kitchens, potentially merge some rooms, and you have a workforce housing or apartment product. The density entitlement is already approved. We saw this happen during COVID when hospitality assets cratered, and it's going to happen again.

2. Hotel to short-term rentals / Airbnb: Depends on local zoning, but if it pencils and the jurisdiction allows it, this is a real path.

3. Hotel to dorms or government/institutional housing: Especially relevant in markets with a university presence or a need for transitional housing.

The cost to convert is real, but the infrastructure headstart is significant. If you can acquire a distressed hotel at the right basis, the multifamily conversion play is one of the stronger value-add strategies in this environment.

Data Centers and Cybersecurity: Still Bullish, But Mind the Risk

A month ago, data center real estate was the cleanest opportunity in the market. AI demand, computing capacity requirements, and the push to expand US-based infrastructure made it one of the most compelling asset classes. All of that is still true — the fundamental demand drivers haven't changed.

What has changed is the risk profile. Data centers have been explicitly identified as strategic targets in a conflict scenario, and that's both physical and cyber. Iran has already signaled that digital infrastructure is a focus area for retaliation. You can bomb a building, but you can also hack it. Both are now on the table.

Does that mean I'm walking away from data center real estate? No. But it means:

• Security investment needs to be escalated significantly — physical and cyber

• Terrorism insurance should be on the table for any data center acquisition

• You need to factor the new risk premium into your underwriting

The broader opportunity here spills into the cybersecurity workforce and tech ecosystem. Orlando, where we're based, is growing fast as a tech hub, and the job market for cybersecurity professionals is essentially unlimited right now. That workforce growth has CRE implications — lab space, flex office, and tech-oriented buildings in that ecosystem are going to benefit.

Development Costs and Supply Chain: Know What It Costs Today

Development was already under pressure before this escalation. Tariffs on imported materials from China — steel, aluminum — had already pushed construction costs up. Now you add the risk of disruption to the Strait of Hormuz, which is a critical shipping lane for goods moving from the Middle East and Asia to the US. If that strait gets blockaded or even partially disrupted, it means one of two things: shipping routes get longer (higher fuel cost), or the cost of imported goods at the source goes up because their energy got more expensive. Either way, materials cost more to get here.

Here's what I'd recommend for anyone in development or considering a development project:

1. Only pursue already-entitled land right now.Entitlement can take a year, and you cannot underwrite a proforma today based on what materials might cost twelve months from now. If the property is already entitled, you can start building with today's pricing.

2. Lock in material prices as early as possible. Buy in bulk if you can. Lock down your cost per square foot before a likely 10%-20% increase.

3. Look at domestic sourcing. It's more expensive upfront in some cases, but it eliminates supply chain risk.

4. Know your exit strategy before you break ground. In an uncertain environment, having a clear exit is not optional.

5. Get creative with your capital stack. Equity, preferred equity, and private debt all have a role right now when institutional lending is tightening.

If you already own an asset, be careful about overleveraging for improvements. Keep capital reserves available. If your asset is highly leveraged and the returns are thin, this may be a good time to consider trading out before any downward pressure hits your returns.

Office Sector: The Hard Truth and the Silver Lining

Office is the sector that's been struggling the longest — 20-25% vacancy nationally, remote work accelerating, and now a war scenario that gives more people more reasons to stay home. If you're in professional office right now, you need a clear strategy.

The hard truth: the geopolitical environment is going to continue to exacerbate what was already a difficult market. Conference attendance is down, hybrid work is the norm, and fully remote employment is increasing.

The silver lining: distressed office assets are selling at deep discounts. If you're a patient capital investor with cash, there are real buying opportunities in office right now — provided you go in with a strategy.

What's working in office:

• Amenity-rich spaces: Offices with gyms, wellness facilities, food service, and other non-work amenities are outperforming. Workers are more willing to commute when the office offers something their home doesn't.

• Smaller format space (under ~3,000 sq ft): Still moving. Large floor plates are the ones sitting empty.

• Medical office: This is its own animal within the office category, and it's doing well. More on that below.

What to do with struggling office buildings:

• Office to residential conversion: Still the strongest [office adaptive reuse strategy] in markets where the underlying real estate basis is low enough to support it.

• Convert to medical office: Requires zoning review, but if the building qualifies, it's a path to a use category that's actually in demand.

• Consider executive office suites: Small businesses are still driving demand for affordable office space. While this model is often more affordable for small business owners, the income per square foot is at a premium.

Resilient Asset Classes: Where to Put Capital Right Now

If you're trying to figure out where to deploy capital in an uncertain environment, here are the asset classes I feel most confident about:

Industrial / Logistics — My #1 Pick

Industrial is the most consistent asset class I've followed, and it continues to strengthen. The reshoring and nearshoring trend is driving demand for domestic warehouse and distribution space. The shift from just-in-time to just-in-case inventory (companies keeping more stock on hand after the supply chain disruptions of COVID) means they need more space. Cold storage is supply-constrained and growing. Last-mile and last-touch delivery facilities are in demand as e-commerce continues to reshape distribution.

For Central Florida specifically, we saw a major influx of distribution center development when our ports opened up during the California port backlog. That infrastructure buildout is still happening. Mid-size and smaller industrial (think 4,000–10,000 sq ft flex) is in the highest demand.

The US Navy's dominance of global waterways means our logistics backbone is fundamentally sound, and the buildout of ground transportation — roads, rail, inland distribution — is still in its growth phase. This is a long-term tailwind for [industrial real estate and logistics].

Multifamily — Secondary and Tertiary Markets

Multifamily remains a stable, long-term hold. But location matters more than ever. Avoid urban cores — they have higher vacancies and more competition. Focus on secondary and tertiary markets: in Central Florida, that means places like Clermont, Winter Garden, Sanford, and surrounding communities. These markets are supply-constrained, growing faster than city centers, and the [workforce housing and multifamily demand] in those areas is not going away.

Senior housing and retirement communities are a specific opportunity in Florida given the demographic wave. Central Florida is seeing massive retirement community growth driven by the baby boomer population. Healthcare-adjacent senior living is a strong niche within multifamily.

Medical Office

Healthcare is a growing sector in Florida, driven primarily by the massive 55-plus population. Central Florida is growing by roughly 150,000 people annually, and a significant portion of those are retirees. That drives demand for everything from cancer research and pharmaceuticals to outpatient clinics and specialist offices. Medical office sits at the intersection of an office asset (where pricing has been suppressed) and healthcare demand (which is growing). That's an interesting risk-adjusted entry point.

Self-Storage

Self-storage is the perennial performer. High margins, consistent demand, recession-resistant. The challenge is that most inventory available on the market is old — we're talking 25-30+ years, at or past its useful life. The seller often can't afford to tear it down and rebuild. So your entry points are: finding a genuinely distressed seller who needs to move the asset, or buying into a new development. If you can find something that isn't end-of-life, self-storage is as close to a safe bet as commercial real estate offers.

Final Thoughts: Discipline Over Fear

This is not a moment to panic, and it's not a moment to ignore what's happening. The macro uncertainty is real, the capital market effects are already showing up, and certain sectors are going to face pressure. But real estate has always offered opportunities for the investor who does the work, understands the local market, and goes in with a clear strategy.

If you're sitting on cash, the environment is actually favorable for disciplined buyers. Less competition, more negotiating leverage, and sellers who are ready to deal. Know your asset class, know your market, and know your exit before you enter.

If you found this breakdown useful, [subscribe to The Commercial Dept podcast] for weekly conversations on what's actually happening in commercial real estate. And if you have questions about anything specific to the Central Florida market or want to talk through a deal, reach out directly. Do your due diligence — and if you have counter thoughts on anything we covered, we genuinely want to hear them.