INTRODUCTION Contributed by: John Sullivan and Michael Haworth, DLA Piper LLP
tax exemptions historically enjoyed by data centre operators. Power is an area where China may have an advantage: according to the Wall Street Journal, China has the largest power grid in the world and some Chinese data centres pay less than half of what owners of data centres in the US pay for electricity. Just as the general sense of optimism that prevailed in most commercial real estate markets at the end of 2024 was tempered by the tariff and trade uncer - tainty that developed in the early part of 2025, as we enter 2026, geopolitical tensions – especially regard - ing the conflict in the Middle East – have injected new uncertainties into the markets. In February, the World Uncertainty Index (WUI) recorded its highest reading in its three-decade history, well above previous crisis peaks recorded during the September 11 attacks in 2001, the Iraq War in 2003, the 2008 global financial crisis and the COVID-19 pandemic in 2020.
A prolonged conflict with Iran could cause increases in the cost of fuel, transportation and petrochemical- based materials and disruptions in aluminium supply (particularly in Europe and the US), adding additional pressure to projects already strained by tariffs and inflation. Europe and particularly Asia are both more dependent on energy imports from the Persian Gulf than the US: according to the New York Times, Japan imports 57% of its energy from the Gulf, with South Korea at 55%, Italy and France at 22% and 18% as compared to the US at 10%. As a result, countries other than the US may be more vulnerable to short- term supply shocks as well as longer-term increases in energy costs. Furthermore, rising energy prices could increase inflationary pressures, which in turn could cause the US Federal Reserve, the ECB and other central banks to keep interest rates higher for longer. On the other hand, there are a lot of factors that bode well for CRE this year, and if there is a relatively quick end to the Middle East conflict, the predictions that 2026 will be a strong year for CRE could come to pass.
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