The cost of commercial property construction could climb an estimated 4.6% as new tariffs drive up prices on imported materials and products, potentially leading to higher rents, according to James Bohnaker, senior economist at Cushman & Wakefield.
The potential increase — ranging from 4% to 5% compared with a no-tariff baseline — will depend on property type, Bohnaker said in a recent Behind the Numbers video. While tariffs can trigger price pressures, he noted that markets tend to adapt. For example, contractors may choose lower-cost sources where possible, he said.
A slowdown in construction activity across many commercial real estate sectors could also temper the impact. Fewer projects mean less competition for labor and materials, which typically puts downward pressure on costs.
“That doesn’t mean tariffs are not a factor — they’re just one of many factors,” Bohnaker said.
“This estimated impact of 4.6% may be spread out over many months and is, of course, subject to change with shifting policy and market conditions.”
In theory, importers of building materials, such as steel, aluminum, glass and construction fixtures, will feel the initial impact of tariffs, since they pay customs duties. In practice, however, research shows that price shocks are typically passed down the supply chain. First to contractors and subcontractors, then eventually to developers, tenants and end users through higher project costs or rents, he said.
The latest round of trade measures has renewed concern across the construction and development sectors. The U.S. continues to maintain tariffs on steel and aluminum imports from multiple trading partners, while new or expanded tariffs on Chinese goods — including building products such as electrical components, flooring and furnishings — remain under review.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.