/>iThis year has seen a renewed focus on tariffs, especially on construction materials such as steel and aluminum. In February, the current administration imposed a 25% tariff on steel and aluminum imports.[1] In June, the administration increased the steel and aluminum tariffs to 50%,[2] and on August 18th, expanded the tariffs to include over 400 additional product categories[3].
In the retail context, we often think of tariffs in terms of the individual pricing of certain materials or consumer goods. However, the impact of tariffs on commercial real estate has a downstream effect on end-product pricing. Commercial real estate sits at the focal point of many products and industries, with commercial construction playing a primary role in continuing supply across and within various sectors.
Key economic factors in commercial construction include strength of the local market and access to cheap capital, but of similar importance is the cost of the materials themselves. Fluctuations in the cost of steel significantly impact the overall cost of a building project. Approximately a quarter of all steel used in the US is imported [4], with Canada, Mexico, and Brazil being the top three sources.[5] While tariffs may be beneficial to local steel-producing markets, their overall impact when considering imports, has been an increase in the pricing of large-scale commercial projects.
Further, for rough-in (the installation of electrical, mechanical, and plumbing), the fluctuations in cost of smaller-scale metal materials, like sheeting, grating, and piping also affect the overall price of a project. Likewise, depending on the needs of the end occupant, there may be specifically outsized rough-in needs like a growing store’s need for refrigeration or electrical capacity. For fixtures and finishing, the effect of tariffs on imports is even more apparent to the end-occupant. Similarly, the cost of appliances and other equipment can have an additional impact.
All the cost above factors into the end price of rent for a commercial tenant. Increasing construction costs can put pressure on existing space, especially in crowded markets. Investors should take note of the potential long-term impacts of the tariff environment.
Footnotes
[1] https://www.reuters.com/markets/commodities/new-steel-aluminum-tariff-rates-take-effect-march-12-executive-orders-show-2025-02-11/
[2] https://www.whitehouse.gov/fact-sheets/2025/06/fact-sheet-president-donald-j-trump-increases-section-232-tariffs-on-steel-and-aluminum/
[3] https://www.nbcnews.com/business/business-news/trump-expands-50-steel-aluminum-tariffs-include-407-additional-product-rcna225899
[4] https://www.steel.org/2025/01/steel-imports-up-2-5-in-2024/
[5] https://www.trade.gov/data-visualization/united-states-steel-imports-report
