Construction cost inflation continued to moderate in 2024, with North America experiencing a 1.11% increase in the fourth quarter and a 4.69% rise year-over-year. However, concerns are growing over the potential impact of the Trump administration’s push for higher tariffs, which could increase costs for developers.
Key materials such as lumber, cement and steel are imported, and tariff-related price hikes are expected to make construction more expensive, especially for multifamily projects. Additionally, labor shortages and higher borrowing costs complicate new project viability.
Experts remain cautious about future construction activity. While some optimism exists, particularly for multifamily and warehouse construction, the threat of tariffs and immigration restrictions could disrupt supply chains and labor availability, leading to further cost increases and delays. Some developers may turn to new technologies or modular construction to mitigate rising costs.
The outlook is mixed, with expected growth in construction activity in 2025, driven by potentially falling interest rates and increased private development. However, external factors like tariffs, labor shortages, and climate change-related challenges in certain states could counterbalance these gains.
Reference
Mattson-Teig B. (2025) Snapshot 2025 Outlook for Construction Costs. Urban Land. February 19.