A little more than a year ago, President Donald Trump launched “Liberation Day,” which imposed broad tariffs on imports and marketing a shift in trade policy.
What has been the impact on commercial real estate construction?
To answer this question, Cushman & Wakefield analysts collected and analyzed data over the past year and presented it in its “Impact of Tariffs on U.S. CRE Construction Costs report. The broad analysis forecasts that current tariff policies will lead to an overall CRE materials cost of 6.0% in 2026 (relative to a 2024 baseline), while total project costs will rise by 3.0%.
Here’s what else the analysts said.
Construction Cost Increases
The producer price index (PPI) for the construction industry increased by 2.8% in 2025, the fastest rate of growth since 2023. The report suggested that tariffs increased costs for imported and domestic materials.
The PPI has increased by approximately 40% over the past five years.
While import prices for building materials (excepting metals) fell 8.8% through 2025, the rate excluded customs duties paid and “understand the full cost to domestic users,” suggesting that “importers are seeking lower-cost foreign alternatives.”
Costs Across Asset Types
The report said that construction material costs are anticipated to increase by 5.4%-6.8% due to tariffs, leading to an increase in total project costs of 2.8% to 3.4%.
While costs will vary by market and property type, the report said data centers are most likely to be impacted “due to their heavy reliance on metals such as copper.”
Construction Demand
The report noted that, excluding data centers, most construction pipelines are below the 10-year average, relative to inventory. High interest rates, bank lending and supply continue to put downward pressure on construction activity, “with tariff-driven cost increases likely to further exacerbate near-term challenges,” the analysts said.
Another issue driving the challenge is trade policy uncertainty; continued policy changes are driving pricing volatility and cost uncertainties, which could show “new development and the CRE construction pipeline until greater clarity allows for more confident underwriting,” the report said.
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