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Construction Cost Increases Slow, But Challenges Remain
Slice of Real Estate Team
March 13, 2025
Key Highlights:
Construction cost increases have fallen below their 5- and 10-year averages.
New U.S. tariffs on imports from Canada and Mexico create uncertainty.
Labor costs and commodity prices (lumber, steel, copper, cement) remain high into 2025.
New office construction pipeline is down 40% YOY, pushing demand for fit-outs.
Tenant improvement (TI) packages increased 7% YOY, with some markets seeing a 20% rise.
Source: Business Wire
Notable Quotes:
“While we’re seeing the pace of inflation slow on construction costs, there remain serious headwinds and uncertainty about the impact of tariffs and labor shortages on the construction industry.”
“While new office construction pipeline has decreased, costs for all construction will continue to rise with more fit-out activity in existing offices and the strength of new construction in other property sectors, which increases competition for construction materials and labor.”
Why This Matters:
With inflation easing, construction cost increases have slowed, but the industry still faces tariff-driven material costs, labor shortages, and prolonged permitting times. As new office developments decline, fit-out demand rises, increasing competition for materials and labor. Cushman & Wakefield’s 2025 Americas Office Fit Out Cost Guide provides crucial insights for occupiers navigating these challenges, helping them refine capital planning and budgeting in an evolving market.