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Do projected cost increases affect certain property types more than others?
5.4%-6.8%
The projected percentage increase in construction materials costs for CRE projects in 2026 attributable to tariffs ranges from
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1 Based on in-place tariff rates, static import levels across countries, 75% cost pass-through to users, and typical product mix contributions to overall materials costs according to C&W Project & Development Services. 2 For this analysis, we have assumed no change to the cost of labor or other construction inputs 3 Office Renovation represents renovations to existing office structures that typically does not require changes to the primary structural component such as envelope, foundation and windows. Source: Cushman & Wakefield Research (Data as of April 7, 2026)
What happened to u.S. construction materials imports in 2025?
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How much did construction costs increase in 2025?
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Did domestic production and consumption increase?
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Has U.S. CRE construction demand slowed?
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Have tariffs begun to impact construction pipelines?
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What steps can developers take to underwrite effectively and mitigate cost overruns?
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The projected percentage increase in total costs for CRE projects in 2026 attributable to tariffs ranges from
2.8%-3.4%
across property types.2
Construction materials prices are expected to rise 5.4%-6.8% due to tariffs, depending on property type. Assuming no changes to other costs such as labor, total project costs are expected to increase 2.8%-3.4%. While some of this increase is already priced into market conditions, further rises are likely over the next 6-12 months. Data centers are likely to be most impacted due to their heavy reliance on metals such as copper—a key input for cooling, data transmission, power cabling, grounding, and electrical systems. Large hyperscale AI facilities can require over 50,000 tons of copper per site. With the exception of “Office Renovation”3, the analysis is based on the most common mix of material inputs used in ground-up development. Materials costs will vary by region and property type, reflecting supplier dynamics such as sourcing origins and local competitiveness.
Analysis
What are U.S. construction material tariff rates now?
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Notes: - Aluminum, Steel, Copper, and Asphalt wAvg tariff rates have not changed Post SCOTUS and Section 122 implementation - Weighted Average Tariff Rates (wAvg) are based off 2025 import values and 10% 122 Tariffs Source: Cushman & Wakefield Research (Data as of April 7, 2026)
Analysis On Feb. 20, 2026, the Supreme Court (SCOTUS) deemed IEEPA reciprocal (country-specific) tariffs to be unconstitutional. All IEEPA reciprocal tariffs were repealed and, in response, the current administration implemented new 10% Section 122 tariffs on most imported goods, which will last 150 days. Notable product specific tariffs such as those on aluminum, copper and steel were unaffected by the SCOTUS ruling, and thus are still in place. The post-150-day outlook is uncertain. While Congress is unlikely to make tariffs permanent, ongoing reviews of select trade partners’ excess capacity could enable new Section 301 tariffs, keeping overall tariff rates near current levels. At this stage, it is unclear how or if construction materials will be impacted. Tariff-related impacts to construction materials costs have modestly decreased compared to pre-SCOTUS tariff repeals, with average tariff rates on construction materials dropping from 38.7% to 32.6%.
*“Weighted Average Statutory Construction Tariff Rates” is an aggregation of total country tariff rates weighted by 2025 import values Note: *When Section 122 rates expire, current administration likely to find ways to keep tariff rates at similar levels, “Building Material” includes: Steel, Aluminum, Copper, Lumber, Masonry, Glass, Concrete, Plastics, and Textiles Source: U.S. Census Bureau (BOC), Moody’s Analytics, Cushman & Wakefield Research
Analysis U.S. Imports of construction materials decreased annually by nearly 4% in 2025. U.S. imports from Canada, China, and Mexico each declined by over 10%, reducing their combined share of construction material imports from 41% in 2024 to 34% in 2025 (–7.2%). Canada remains the largest U.S. source of aluminum, copper, steel, and lumber imports, with its share declining from 31% in 2024 to 24% in 2025. Chile and the Congo’s share of U.S. copper imports has fallen from 29% in 2024 to 20%, despite continued growth in imports from both countries in 2025. U.S. construction imports have declined among major partners but risen by 12% from the rest of the world, reinforcing U.S. trade diversification and reduced reliance on any single partner. Diversification has helped mitigate, but not fully prevent, cost pass through to real estate users.
What happened to U.S. construction materials imports in 2025?
Source: U.S. Bureau of Labor Statistics, Cushman & Wakefield Research
Analysis Inflation for construction inputs is accelerating. With labor costs also rising, developers and tenants should expect further construction cost increases in 2026. The producer price index (PPI) for construction industries rose +2.8% in 2025, the fastest since Jan 2023, suggesting tariffs increased costs for both imported and domestic materials. The PPI increased roughly 40% cumulatively over the past 5 years. In contrast, import prices for building materials (ex-metals) fell 8.8% through 2025, but exclude customs duties paid and understate the full cost to domestic users. This does suggest that importers are seeking lower cost foreign alternatives. Aluminum and Iron & Steel saw domestic prices increase sharply in response to tariffs by +28% and +12% in 2025, respectively. Copper hit a two-year high by the end of 2025, with producer prices up +21% and import prices up +14%, highlighting elevated costs globally amid rapidly strong demand. Rising energy costs resulting from higher gasoline and diesel prices present yet another challenge for the production and transportation of construction materials.
PPI for construction costs increased by 3%.
1 “raw material” only includes copper, gypsum, cement, iron & steel, aluminum Source: U.S. Geological Survey (USGS), Cushman & Wakefield Research
Analysis One objective of tariff policy is to shift production to domestic sources, but this has yet to materialize for key building materials. U.S. production of select raw materials has fallen 6% versus the 2021–2024 average1. Gypsum and cement production fell 6.3% and 5.9% versus the 2021–2024 average, reflecting weaker construction demand, idle plants, and ongoing upgrades. Refined copper output fell 10% vs. the 2021–2024 average due to refinery maintenance and lower ore grades production, though four new smelters are expected online in late 2026. Despite new investment, barriers remain. Mining, extraction and refining projects can take up to a decade to come online, with labor constraints and outdated infrastructure requiring significant upgrades. Amid trade policy uncertainty and challenging demand dynamics, the cost of achieving true self-sufficiency in domestic building materials is years away and not likely attainable for many materials.
Upgrades and refinements are underway across materials, but domestic production will take time to meet demand.
Source: CoStar, Cushman & Wakefield Research, Data Center HAWK and DC Byte
Analysis Excluding data centers, most U.S. CRE construction pipelines are below the 10-year average relative to inventory. High interest rates, cautious (but improving) bank lending, and recent supply are weighing on construction activity, with tariff-driven cost increases likely to further exacerbate near-term challenges. Trade policy uncertainty is as impactful as tariffs. Ongoing policy flux is driving pricing volatility and cost uncertainty, likely slowing new development and the CRE construction pipeline until greater clarity allows for more confident underwriting. Construction loan originations are likely to pick up in 2026, which will increase demand for construction materials and potentially drive costs higher. Amid robust building activity for data center and infrastructure projects, costs are likely to accelerate further by year’s end.
Analysis Import prices for building materials have declined 2.5% year-to date through June, However, import prices exclude the customs duties paid for tariffs and do not reflect the full cost borne by domestic users. By contrast, the producer price index (PPI) for building materials increased by 6.3% year-over-year as of July, suggesting that tariffs are raising prices for materials of both imported and domestically sourced product. At present, U.S. production capacity is unable to meet domestic demand for most key building materials. For example, with copper, the U.S. produces only about 60% of the capacity consumed each year, meaning that foreign suppliers are critical to supporting construction activity. U.S. manufacturers may invest in new plants and refineries, but these facilities often take up to a decade to come online. Labor constraints and outdated facilities are also potential barriers. Substantial modernization of existing facilities and new investment will be required if the U.S. is to become self-sufficient in terms of sourcing building materials.
Can contractors avoid cost increases by sourcing products domestically?
Do projected construction cost increases impact certain CRE property types more than others?
Which building materials are most likely to experience cost increases?
What proportion of CRE project costs are related to materials versus labor and other inputs?
Which countries are important sources of imported building materials?
How likely are suppliers and contractors to pass along cost increases to their clients?
Answer
* % Change is expressed in square footage except data centers which are expressed in % change in MegaWatts Source: Costar, Cushman & Wakefield Research, DC Byte
Analysis As of Q2 2025, the supply pipeline for office space is down 62% from the 5-year average; the industrial pipeline is the lowest since 2017; groundbreaking on multifamily units is the softest since 2012; and retail construction has been subdued for years. High interest rates, cautious (but improving) bank lending, and the recent wave of supply are all contributing to softer construction activity. Further cost increases arising from tariffs will likely exacerbate these development challenges in the near term. Trade policy uncertainty is just as impactful as the tariffs themselves. With trade policy in constant flux, pricing volatility and uncertainty around future cost expectations may hinder new development and slow the CRE construction pipeline. Greater clarity will be needed before market participants can confidently underwrite projects with more predictable materials cost expectations.
HOW MUCH DID CONSTRUCTION COSTS INCREASE in 2025?
Construction pipelines were already thinning due to supply and demand conditions and have become even more constrained in Q2 2025.
What are the new tariff rules?
