If you’re a REALTOR® who wants to stay informed about what’s happening in commercial real estate, it’s essential to understand how global trade issues, like tariffs on Chinese goods, are shaking things up. Construction costs will affect residential and commercial projects, but because the effect may be higher on the commercial side. Even though these tariffs mainly affect industries like manufacturing, they trickle down into the construction of commercial properties in some significant ways. Here’s what you need to know.
Steel and Aluminum: One of the most significant impacts comes from the tariffs on steel and aluminum. China is a major supplier of these materials, and with tariffs in place, the cost of these metals has gone up. According to The National Association of Home Builders (NAHB), since steel and aluminum are essential for building everything from office buildings to shopping centers, these price hikes can drive up construction costs. For developers, that means higher budgets and potential delays—which could affect the timing of new commercial projects.
Electrical Equipment and Components: It’s not only building materials like steel that feel the pinch. Many electrical components used in commercial properties, from lighting systems to HVAC units, are imported from China. Tariffs on these items push up the price, which impacts the overall cost of constructing a commercial building. According to The Urban Land Institute (ULI), this can also affect the long-term maintenance costs for property owners, who might face higher operational expenses after the building is complete.
Construction Machinery and Equipment: Another area where tariffs are making a difference is with construction machinery. A lot of the heavy equipment used to build commercial properties, such as cranes and bulldozers, comes from China. With higher tariffs on these machines, construction companies could see increased costs for the equipment they rely on. This could lead to project delays or even force some developers to change their plans to accommodate the higher costs.
The Bigger Picture: For developers, these rising costs can make a huge difference in whether a project moves forward or gets put on hold. When building costs go up, it can alter the financial outlook of a commercial project, making some properties less profitable. In response, developers might adjust timelines, look for alternative materials, or change project designs to offset the higher expenses caused by tariffs.
While these tariff-induced changes are more evident in commercial real estate, all REALTORS® should understand how they will affect the market. Staying informed about the challenges in the commercial sector will help you better understand the bigger economic picture.
With a childhood passion for building and a knack for community transformation, Jana Truman brings a unique perspective to commercial real estate. Known for connecting the dots in complex deals and speaking 'residential,' Managing broker for SVN Accel Commercial Real Estate, Jana is the go-to expert who maximizes value and maintains strong relationships, benefiting clients and residential agents alike.
