Several years ago, I was involved with a group that brought the Urban Land Institute to Alabama. The ULI has always been a resource for best practices in city planning and responsible land use, but also a great knowledge base for real estate trends.
I recently read one of their articles monitoring REIT research and how it can offer insight into how much tariffs will impact construction pricing. To summarize:
- As of June 4, U.S. tariffs on steel and aluminum imports from all U.S. trade partners increased from 25 to 50 percent.
- One REIT estimated tariffs might increase total project hard costs by about 5 percent, a 3–4 percent increase in overall cost basis.
- In most cases, a larger macro backdrop of declining construction starts offsets this activity.
A couple of interesting observations this week:
A few days ago, I was with the CEO of fairly large steel fabricator. In his opinion, steel tariffs need to be in the 10% range to level the playing field–not 25% and for sure not 50%. The markets have been trending up this week, and I have been wondering why. This morning, someone said to me, “The president is always announcing new tariffs and deadlines that have not become reality.” It seems the market has gotten so use to hearing this rhetoric, it just “yawns.” We’ll see.
