Rising Tariffs, Data Center Growth Set To Drive Up Construction Costs

The price of construction materials is expected to rise between 5.4% and 6.8% in 2026 due to tariffs, according to a report from Cushman & Wakefield.

Assuming no changes to expenses like labor, total project costs are expected to increase between 2.8% and 3.4% this year as a result of tariffs.

Not all property types are expected to bear the brunt equally. Data centers, which rely on pricey materials including copper, as well as retail and industrial, are expected to see costs increase between 3.1% and 3.4%. 

Multifamily and office, including office conversions to other property types, are expected to see 3% and 2.8% cost increases, respectively, according to Cushman. 

Construction costs in the first two months of 2026 were up, with overall construction input prices 3.1% higher than a year ago, Bisnow reported in March. Energy prices were driving the increase at the time, before the beginning of the conflict in Iran.

The increases Cushman anticipates in the coming year are on top of those experienced in materials costs in the last few years.

The producer price index for construction went up 2.8% in 2025. The rise indicates that tariffs increased costs for imported and domestic materials. In the last five years, the price index has increased about 40% cumulatively. 

Rising materials costs from tariffs have already hit the development pipeline nationwide, pushing construction starts down and dropping the construction backlog to a four-year low.