Construction Costs Hit Fastest Pace Since the Pandemic — and Tariffs Aren't the Culprit

➤ 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.