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Five months after we first looked at tariff risk in commercial real estate, construction costs are higher, trade policy is still moving, and waiting for certainty looks less realistic than ever.
Back in March, we wrote about what tariffs could mean for commercial real estate development.
At the time, the concern wasn’t simply that steel, aluminum, copper, lumber, or other building materials might cost more. It was that developers were being asked to make long-term decisions while the assumptions underneath those decisions kept changing.
Five months later, that looks less hypothetical.
Construction costs have moved
When we published in March, nonresidential construction input prices were 2.9% higher than a year earlier.
By July they were up 7.2%, according to Associated Builders and Contractors’ analysis of Bureau of Labor Statistics data released August 13. Overall construction input prices were up 7.4% year over year.
Both were essentially flat month to month, up 0.1%, and that flatness is worth reading carefully. ABC chief economist Anirban Basu attributed the calm July to a dip in fuel prices at the start of the month, noting that diesel then surged more than 50 cents a gallon before month end. So the headline looked quiet while the materials underneath it did not.
Tariffs don’t explain every increase. Energy, labor, logistics, and domestic demand all matter. But tariffs are now interacting with those forces rather than sitting off to the side as a theoretical risk, and that makes underwriting harder.
The forecasts have been moving too, which is its own kind of signal. When we wrote in March, the working estimate we cited from Cushman & Wakefield put tariff-driven materials increases near 9%, with total project costs up around 4.6%. By its April analysis, the same firm had revised that down to roughly 6% on materials and 3% on total project cost. July’s actual materials figure came in at 7.4%.
So over five months the forecast fell by a third, then reality landed above the revised number. The exact figure will vary project by project anyway. The more useful point is that developers are pricing deals while the materials, the policies, and the forecasts about both are all still in motion.
August showed how fast the rules can change
The U.S.-Canada dispute is a clean illustration.
On July 20, the administration invoked Section 338 of the Tariff Act of 1930 to impose additional 50% duties on roughly $20 billion of Canadian goods. The proclamations set an effective date of August 19.
Then on August 18, one day before those duties were scheduled to begin, the White House suspended them for three days while negotiations continued, moving the date to 12:01 a.m. on August 22. Talks broke down over that weekend and the tariffs took effect Saturday morning. Prime Minister Carney announced Canadian retaliation the same day, covering $27.6 billion of U.S. goods and starting September 8.
The product lists reach much further than the headline categories suggest, and this is the part worth understanding. The names of the three proclamations, dairy, alcoholic beverages, and motor vehicles, describe why each one was issued rather than what it covers. The motor vehicle proclamation alone runs from Chapter 4 to Chapter 97 of the tariff schedule. Cement, lumber, plywood, fiberboard, and paper and paperboard products are all on it.
So a developer reading that the U.S. tariffed Canadian cars has no particular reason to think the concrete and sheathing on their project just got more expensive. Coverage has to be checked against the actual HTS list at the eight-digit level, not by product name.
Goods already carrying Section 232 duties are excluded, along with steel, aluminum, and copper derivative articles, so Canadian metals aren’t newly affected by this round. Energy, potash, fish, and critical minerals are out as well.
For a project team, the sequence is the problem in miniature. A project team evaluating a concrete package faced one tariff assumption on August 17, a different one on August 18, and another by August 22. Commercial projects do not move on that timeline.
One more wrinkle for underwriting: this is the first use of Section 338 in 96 years, and trade lawyers have raised real questions about whether it survives a challenge. Nobody has sued yet. Pricing these as permanent may cost you a deal, and pricing them as temporary is a bet on litigation that doesn’t exist.
There isn’t one “tariff number”
A commercial building isn’t one material from one supplier in one country. It’s a structural system, an envelope, mechanical and electrical equipment, finishes, controls, fasteners, and hundreds of products with their own supply chains.
Some are directly subject to tariffs. Some contain tariffed materials. Some are made domestically but compete against imports. And some move simply because suppliers are responding to the possibility of future duties, shifts in demand, or changes in global trade flows.
Which is why developers rarely get a clean percentage back when they ask the obvious question: how much more will this make my building cost?
Specifying domestic materials doesn’t necessarily solve it either. Cement is the sharpest example. Canada and Mexico supply roughly 27% of imported U.S. cement, less than 7% of what the country actually consumes, so the issue is less about a nationwide physical shortage than about how pricing moves through regional markets. Cement is heavy, which means it gets bought regionally from whoever is closest while being priced against a national market. When imports get 50% more expensive, domestic producers everywhere gain room to move, including in markets that never bought a ton from Canada.
Copper shows the same behavior from a different angle. Reuters reported in late August that the threat of future U.S. duties had already pulled a record 1.64 million tons of refined copper into the country during 2025, with prices now running just under their all-time high. What analysts had projected as a global surplus became a balanced market, not because copper got scarce but because so much of it moved into American warehouses ahead of a tariff that hasn’t happened yet.
Tariffs don’t just change prices. They change behavior, and often that behavior shows up first.
The mismatch
Commercial projects get planned over years. Trade policy is changing over weeks.
A structural system selected in schematic design gets priced against a very different market months later. A facade strategy that works in today’s pro forma may not by the time the project bids. Equipment pricing shifts, lead times stretch, and contractors add contingency to protect themselves against costs they can’t predict.
None of that kills a project by itself. But development economics get decided at the margins. A little more contingency here, a material increase there, another month of carry, a redesign that happens later than it should have. Eventually those stop being small.
Waiting is a strategy too. It just may not be a good one.
When the market is uncertain, waiting feels prudent. Wait for trade negotiations to settle, for material pricing to stabilize, for interest rates, for more clarity.
The trouble is that clarity may show up long after the opportunity has.
In March we argued that decision paralysis could become one of the biggest risks tariffs create. That still holds. After another five months of moving policy, it’s getting harder to plan around the idea that the market returns to being predictable on a convenient timeline.
So the more useful question isn’t what the tariff will cost. It’s how much room the project has if conditions change.
We laid out what that looks like in practice in the second part of our March series, How Developers Can Navigate Tariff Risk Through Smarter Architecture Decisions: modeling material scenarios before capital is committed, building substitution pathways into the design instead of value-engineering them in later, and reducing exposure by reducing material intensity. Five months on, we’d change none of it.
What we would add is a note about timing, because that’s where the August sequence hurt people. Substitutions are far less costly in schematic design than they are once construction documents are finished. By the time a tariff surfaces in a bid, the decisions that set the exposure are usually several months and a couple of drawing sets in the past. A team that can only answer the cost question after a bid comes back is answering it too late to use the answer.
That’s the principle we’ve built our own practice around. In Vitras.ai, cost is evaluated alongside the design process rather than treated as something that arrives later, so when an input changes we can see what it does to the project and test alternatives while those alternatives are still real.
It doesn’t remove tariff risk. It changes how quickly a team can respond when conditions move.
That matters well beyond tariffs. Interest rates move. Labor markets move. Insurance changes. Codes change. Materials become easier or harder to source. Projects that can respond have an advantage over projects that lock in early and find out later.
Five months ago, tariff uncertainty looked like one more development risk to watch. We have better evidence now, and it isn’t resolving on anyone’s preferred timeline.
The answer isn’t to predict it better. It’s to design with more room to move.
This is a follow-up to our March 2026 series: Part 1, Tariffs, Turbulence, and the Future of Commercial Real Estate Development and Part 2, How Developers Can Navigate Tariff Risk Through Smarter Architecture Decisions.