Inputs to new nonresidential construction rose 7.1% year over year in June 2026 per the BLS Producer Price Index while contractors bid prices for new nonresidential buildings rose only about 3.5% roughly half the pace. Steel aluminum and copper intensive goods now carry tariffs up to 50% with downstream equipment at 15 to 25%.
Materials inflation and bid inflation have decoupled. Inputs run at 7.1% while bids crawl at 3.5% and the contractor is swallowing the difference to keep pipelines full in a thin development market.
That is a margin story disguised as a cost story. For owners the risk has shifted from hard cost overrun to counterparty failure. A general contractor bidding below its own input curve may not have the balance sheet to finish the job.
Implications: Underwrite the contractor not just the number. Build escalation reserves and bonding even when a bid looks aggressive. The escalation did not disappear it moved from the invoice to the income statement.
Key Takeaways
- When bids rise slower than inputs someone eats the difference make sure it is not you
- The cheapest bid is now the one to diligence hardest
BLS Producer Price Index June 2026 released Jul 15 2026 · Meck Times Jul 23 2026 Construction Input Costs Remain Sharply Higher Than A Year Ago · Construction Dive 2026 Tariffs drove construction input prices up · Cushman and Wakefield 2026 The Impact of Tariffs on U.S. CRE Construction Costs
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