📢 CRE 360 Signal™.
Construction input prices climbed at a 12.6% annualized pace in early 2026 — the fastest reading since 2022. Current tariff regimes have layered an estimated 6% onto materials costs versus a 2024 baseline, with steel up 17% and aluminum more than 30% over the past year. The response from the development community is now measurable: roughly 60% of developers report delaying or canceling projects, and around 70% of contractors report direct tariff impact. The headline is a cost story. The structural read is a basis-reset story — one that quietly invalidates a year of underwriting.
➤ SIGNALS
Cushman & Wakefield estimates that at current tariff rates, construction materials costs sit roughly 6% above the 2024 baseline, translating to a ~3% lift on total project cost. At the summer 2025 peak, the materials impact was closer to 9%. AGC data shows approximately 70% of contractors are actively managing tariff-driven cost volatility, and forecasting accuracy on hard costs has deteriorated sharply.
Commodity-level moves are concentrated where nonresidential structures are most exposed. Aluminum prices surged more than 30% in 2025, steel advanced 17%, and the composite input-price index is running at its hottest annualized pace in four years. Steel and aluminum represent disproportionate shares of cost in industrial, data center, hospitality, and mid-rise multifamily construction.
The demand-side response is no longer theoretical. A Construction Dive survey cited by industry sources puts delayed or canceled projects at close to 60% of respondents. S&P Global and Hub International both flag the nonresidential segment as the most exposed slice of the pipeline on a weighted basis.
Implications — Our Read
Developers & Sponsors. This is not a cost story. It is a basis story. Every pro forma written against 2024 hard-cost assumptions is now understated by 3% to 6% on total project cost. On a 65% LTC deal, that gap consumes most of the developer-promote spread unless rents, pricing, or cap rates move in your favor — and none of them currently are. Projects still being underwritten off stale cost data are pricing a yield that no longer exists.
The GMP-versus-cost-plus calculus has flipped. Contractors are no longer willing to eat material escalation at the numbers they quoted 60 days ago. Owners face three real options: accept price risk through explicit escalation clauses, fund materially larger contingency reserves, or delay procurement and bet on tariff relief. Each of those has a different impact on closing timing, equity call size, and lender posture.
The 60% delay-or-cancel figure is the real tell. It means the current entitlement pipeline — the one the market is still underwriting absorption against — will not deliver on expected timing or basis. That is a supply-side signal for stabilized cap rates 18 to 24 months from now. Operators with capital and execution capacity to start today at repriced hard costs will own a scarce delivery window.
Key Takeaways
Still unresolved: whether tariff policy holds through the balance of 2026, whether alternative sourcing geographies can absorb volume at scale, and whether labor inflation stacks on top of materials rather than substituting for it. The pro forma didn't change. The basis did. Every number underneath it has to be re-run.
CRE 360 Signal™ — Commercial Real Estate Intelligence
▼ EDITORIAL DESK TOP PICKS
Capital Markets / Debt / Macro
Capital Markets / Debt / Distress
CRE financing deals getting harder as borrowing costs stay elevated — Higher interest rates are still complicating underwriting and slowing deal velocity across multiple asset classes.
$875B in CRE loans maturing continues to pressure refinancing markets — A large share of outstanding commercial mortgages due in 2026 is keeping lenders cautious and selective.
CRE debt markets remain fragmented despite signs of recovery — Capital is available but unevenly distributed across asset classes and borrower profiles.
Private lenders continue gaining share in CRE financing — Non-bank capital is filling gaps left by traditional lenders in higher-risk transactions.
Loan workouts replacing extensions as lenders enforce discipline — Distress strategies are shifting toward restructuring and recapitalization instead of extensions.
Transactions / Deals
Industrial portfolios continue trading between institutional players — Large logistics portfolios remain one of the most liquid segments of the market.
Multifamily transactions remain active despite rent pressure — Investors are still targeting apartments, especially in Sun Belt markets with long-term growth.
Net-lease assets continue to attract capital for stable income — Ground leases and single-tenant properties remain favored for predictable cash flow.
Hotel sector seeing selective investment activity in gateway markets — Investors are targeting repositioning opportunities in hospitality assets.
Mixed-use development deals continue to anchor urban investment — Large-scale mixed-use projects remain a primary deployment strategy for capital.
Office / Leasing
Office market recovery remains highly uneven by geography — Trophy assets outperform while secondary offices continue to struggle.
Sublease inventory stabilizing in some U.S. office markets — Companies are beginning to commit to long-term footprints after years of downsizing.
Office-to-residential conversions accelerating nationwide — Adaptive reuse is becoming a major strategy to address vacancy and housing shortages.
Industrial / Data Centers
Power constraints becoming key bottleneck for data center growth — Energy availability is now a primary limiting factor for new development.
Multifamily / Housing
Multifamily supply surge continues pressuring rents in major metros — New deliveries are temporarily increasing vacancy and slowing rent growth.
Affordable housing demand remains strong despite policy challenges — Workforce housing continues attracting institutional capital due to persistent demand.
Retail
Retail fundamentals remain tight with limited new construction — Low vacancy rates are supporting stable performance in retail assets.
Development / Construction
Construction cost volatility easing but still impacting feasibility — Pricing has stabilized, but projects remain sensitive to cost swings and financing.
Technology / Market Direction
Technology and AI reshaping CRE underwriting and operations — Data-driven decision-making is becoming central to investment and asset management strategies.
