➤ Key Highlights
Construction input prices rose 2.6% in May and 9.6% year-over-year — the fastest annual pace since the pandemic.
Costs had already climbed 6.2% from January to April 2026 before the May acceleration.
Equipment tariffs were cut to 15% on June 8 — yet costs kept rising.
The new pressure point is energy prices, which feed materials, transport, and on-site power.
➤ Signal
The cost story rotated: tariff relief arrived, and energy inflation replaced it — so development feasibility is tightening even as one input cost fell.
The market spent the spring watching tariffs. The June 8 equipment cut was supposed to relieve budgets. Instead, input prices accelerated — because energy, not steel duties, is now the marginal driver. Energy touches everything downstream: cement and glass production, freight, and increasingly the grid-power premium on large projects. A tariff cut you can model; broad energy inflation you can’t easily hedge.
Pro formas built on “tariffs peaked, costs ease” are mispriced. Escalation of 4–6% is the new baseline, higher in energy-intensive trades. Marginal deals stall further; only well-capitalized projects in strong-fundamental sectors (data centers, healthcare, select multifamily) pencil. Watch the irony: the data-center boom straining the grid is also helping inflate the energy costs that make everything more expensive to build.
➤ Takeaway
Tariff relief didn’t lower construction costs — energy quietly took over the squeeze.
Source: Associated Builders & Contractors / BLS via CRE Daily — June 2026
