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More than a year after the launch of the “Liberation Day” tariff program under President Donald Trump, commercial real estate construction is feeling measurable cost pressure. Cushman & Wakefield analysts have tracked pricing trends over the past year and compiled their findings in a report titled “Impact of Tariffs on U.S. CRE Construction Costs,” focusing on how current trade policy is filtering through to materials and overall project budgets.
The analysis projects that, relative to a 2024 baseline, current tariff policies will push U.S. commercial real estate construction material costs up by about 6.0% by 2026. When those higher material inputs are translated through full project budgets, total development costs are expected to rise roughly 3.0% over the same period, according to the report.
Recent producer price index data underscores the trend. The PPI for the construction industry increased 2.8% in 2025, which the analysts note is the fastest annual growth rate since 2023. Over the past five years, the PPI has climbed by approximately 40%, highlighting how input costs have escalated well beyond typical inflation levels. The report links a portion of that recent acceleration to tariffs, which are described as raising costs for both imported and domestically produced construction materials.
Import price data adds nuance to the picture. Building material import prices, excluding metals, fell 8.8% through 2025, but that measure does not capture customs duties. The analysts emphasize that this omission means the index does not fully reflect what domestic users ultimately pay. They interpret the pattern as evidence that importers are actively searching for lower-cost foreign alternatives even as tariffs reshape the effective cost of those imports.
Across asset types, the report estimates that tariffs will drive construction material cost increases in a range of roughly 5.4% to 6.8%. When all hard and soft costs are considered, total project costs are forecast to rise by about 2.8% to 3.4%. While impacts will vary by market and property type, the research points to data centers as particularly exposed due to their intensive use of metals such as copper, which leaves these projects more vulnerable to tariff-related spikes in key inputs.
On the demand side, Cushman & Wakefield notes that, excluding data centers, most construction pipelines are currently below their 10-year average when measured against existing inventory. High interest rates, bank lending conditions and ongoing supply factors are already applying downward pressure on new construction activity, and the report suggests that further tariff-driven cost increases will likely intensify those near-term headwinds.
The analysts also flag policy uncertainty as an important risk factor. They observe that shifts in trade policy are contributing to pricing volatility and cost ambiguity for developers and investors. This uncertainty can make it more difficult to underwrite new ground-up projects, and the report cautions that development and the broader CRE construction pipeline may continue to slow until there is greater clarity around future tariff policy and its impact on costs.
The post Tariffs Set to Drive 6% Rise in U.S. CRE Construction Materials Costs by 2026 appeared first on CRE Market Beat.
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