Cushman Wakefield Reports Tariffs Increase Costs for Commercial Construction

What's Happening?

Cushman & Wakefield has released a new analysis indicating that U.S. trade policy changes are significantly impacting the commercial real estate construction sector. The report highlights that tariffs on imported building materials are expected to raise construction materials costs by an average of 9% in 2025. This increase is projected to lead to a 4.6% rise in total project costs by the fourth quarter of 2025 compared to the same period in 2024. Metals such as steel, aluminum, and copper are experiencing the steepest cost increases, with copper-intensive projects like data centers being particularly affected. The report notes that approximately 40% of construction materials are imported, with Canada, Mexico, and the EU being major sources.

Why It's Important?

The rising costs due to tariffs present a significant challenge for the commercial construction industry, which is already dealing with high interest rates and cautious lending. The increased costs are likely to be passed on to contractors, developers, and tenants, potentially leading to higher rents and project delays. This situation could slow down the growth of the commercial real estate sector and impact economic development. The inability of domestic production to meet demand for key materials like copper and aluminum exacerbates the issue, leaving stakeholders to navigate a volatile pricing environment.

What's Next?

Stakeholders in the construction industry may need to explore alternative sourcing strategies or adjust project timelines to mitigate the impact of rising costs. The development of new domestic production facilities could provide long-term relief, but such projects would take years to complete. In the short term, industry players will need to manage cost pressures and uncertainty as they plan future projects.