When the news of plans to implement massive tariff increases broke earlier this year, the commercial real estate industry’s proverbial hair stood on end. Tariffs could destabilize the economy, drive borrowing costs even higher, increase materials costs for new construction, and decrease occupier demand. In short, the commercial real estate industry has an outsized exposure to increased levies and the subsequent economic impact. The tariff rates announced in April varied, but included a 10% base rate tariff along with an additional country-specific reciprocal tariff. The reciprocal tariffs ranged from 11% to 50% on top of the baseline rate for most countries, while China faced a rate of up to 145%.
Ultimately, the reciprocal tariff rates were paused for 90 days to give governments time to negotiate new trade deals. This month, that moratorium expired, reigniting the conversation and concerns about tariffs. Here is an updated look at where tariffs stand today for commercial real estate developers and the early impact since they were first announced in April.
Tariff Deadline is Extended, for Now
After the initial announcement in April, the Trump administration paused reciprocal tariffs for 90 days while several countries sought to renegotiate trade deals. The 90-day deadline on tariffs expired on July 9, but the administration extended it once again to August 1 as trade deals are in still in negotiation. For many experts, the extension was not surprising. It notoriously can take years to negotiate trade deals. However, there has been success in reaching new agreements. The UK, Vietnam and China have all finalized new trade agreements, and the European Union is getting close to a final agreement. Several other countries are in active negotiations, including South Korea, Japan, India, Brazil, Indonesia, Cambodia, and Thailand.
In the interim, a 10% baseline tariff for all countries remained in effect—and it has brought in significant revenue. The country made $30 billion from the tariff in June alone. That is three times the tariff-related revenue from March, according to a report from NPR. The extension to August 1 wasn’t purely good news. It came alongside an announcement of new tariff rates, even for countries that had already negotiated with trade delegates but had yet to sign a final agreement. Domestically, many welcomed the extension as delaying additional costs—particularly for US manufacturers and commercial real estate owners—but others, like Wells Fargo economists Shannon Grein and Tim Quinlan feel “it does little to alleviate the pervasive sense of uncertainty.”
Construction Material Levies Go Up and Expand
The tariffs have a broad economic impact, and commercial real estate assets can be impacted in myriad ways—from capital costs and availability to demographics and demand. However, the US has also implemented significant levies on product-specific tariffs that could have an outsized impact on prices. Raw construction materials are included in those tariffs—and they are generally not open to negotiation in trade discussions (although the United Kingdom charged a lower rate). In many cases, product-specific rates are expanding.
In June, the tariff for imported steel and aluminum increased from 25% as announced in April to 50%, with the exception of steel from the United Kingdom, which is taxed at a rate of 25%. The higher tariff is already in effect. This month, The Trump Administration also announced plans to implement a 50% tax on copper, another common material in new construction. The plan was announced at a Cabinet meeting, but the implementation date was not announced.
Future tariffs on other raw construction materials could still come. The Trump Administration has already suggested a 50% tariff on imported lumber. The Commerce Department is currently investigating lumber pricing, and will reportedly make a decision about a levy in November. The National Homebuilder Association has publicly opposed a levy on lumber and copper, citing the nation’s severe housing crisis as well as insufficient domestic lumber production to meet current demand.
Limited Early Impact on New Construction
Despite pricing pressure and economic uncertainty introduced by the tariffs, commercial real estate developers have so far taken the tariffs in stride. New multifamily construction starts increased 11% in May and more than 19% in June, after the tariffs went into effect. Even without the tariffs, experts expected multifamily construction starts to fall in 2025 to allow the market to absorb the record new supply delivered to the market in 2024. Instead, developers have continued to pursue projects this year.
The activity shows that many investors and developers are bullish on the market and believe that this is the early stages of a widespread commercial real estate recovery. Some lenders shelved projects in April, but revived them in May, according to lender Bravo Property Trust, and Blackstone Inc.’s Nadeem Meghji, global co-head of real estate, told Bloomberg that the tariffs have not had a material impact on transaction activity. While it is still early and some tariffs could expand, commentary from top industry experts is clear: the overarching real estate fundamentals are positive enough to withstand the storm.
With strong fundamentals, tariffs are really just another pricing metric to consider when penciling a deal. From that point of view, creating efficiencies in the project management of a construction project can go a long way to helping offset rising costs. Modern real estate development software like Northspyre allows project managers to gain critical control and oversight over a project’s budget and spending. Through budgeting tools, financial reporting capability, accurate financial forecasts, and invoice management, project managers are able to create valuable efficiencies that produce cost savings. Volatility seems to be the watermark of this business cycle. Smart construction tools restore stability. In today’s market, stability is a competitive advantage.
Book a Northspyre demo and learn more about how the platform can facilitate efficient project management and provide a competitive advantage.
