• President Donald Trump has imposed a flurry of tariffs that have driven up costs.
• Real estate developers have been hit with sticker shock on steel orders, which have risen 20%.
• Despite widespread optimism at the beginning of Trump's second term, developers have grown worried.

President Donald Trump has promised to power the economy by imposing tariffs on foreign goods and materials.

Instead, the duties are heaping new costs on commercial real estate development projects in the US as prices rise sharply for core building components like steel, aluminum, copper, and tiling.

Joseph Taylor, the CEO of Matrix Development, a New Jersey-based warehouse developer, said that his company recently ran into tariff impacts on the steel it is buying to erect a warehouse in Newark, New Jersey.

"I can tell you steel is up 8-10%" for the project, Taylor said, noting that the increases had driven up the planned building's costs by about $2 million.

Another developer planning a more than $100 million warehouse outside of Washington, DC, meanwhile, said that Nucor, a North Carolina-based steel manufacturer that he had tapped to make the structural beams for the project, alerted him in recent days that prices were rising 15% on his $12 million order.

The developer was able to lock in his original price because he had made a reservation for the steel, but he now anticipates the project's construction costs will rise by about 10% overall because of the impact of tariffs on other materials, such as steel rebar in the project's concrete foundation, as well as growing charges for insulation and roofing.

The developer said that the increases would eat into his forecast returns for the development.

"It's going to be harder to get new projects going," the developer said.

The person did not want to be identified because he said he is negotiating with other suppliers and didn't want to tip his hand on where he anticipates price increases.

The prices of commodity goods like metals and common fabricated products like rebar and steel wall framing that are used in real estate development are strongly affected by global markets, experts say. The tariffs have had the effect of pushing up costs, even for goods made domestically.

"What you did is you hamper competition, so the domestic people simply just raised their price where they can," said Dain Drake, a principal at DeSimone Consulting Engineering, whose focus includes sourcing structural steel for commercial development.

The Trump administration placed a 25% duty on foreign made steel and aluminum imports in February and the trade barriers went into effect on March 12. Trump has explored tariffs on other important building materials, including copper, which is widely used in plumbing and electrical systems.

The increases haven't registered yet in much of the data that tracks materials costs. But experts say builders are beginning to experience sticker shock.

Drake said that quotes for fabricated steel he is helping to procure for the expansion of a manufacturing plant in the Houston area have risen 20% recently — in line with steel increases he has seen across the market. The contractor, which will have to pass the cost onto the customer, was surprised and "not happy," he said, when he reported the new quote.

Drake said that such escalations could impact whether projects proceed.

"It hasn't shut things down yet, but that conversation's going to manifest," he said.

More expensive ceiling tiles and lighting systems

The charges have been felt not just in ground-up development but also in the multi-billion dollar industry for interior work and renovations.

Richard Jantz, an executive at Cushman & Wakefield who leads its project and development services team in the tri-state region, said that a large office tenant recently put a roughly $20 million renovation of a space it occupies in Manhattan on hold because of cost escalations that coincided with the tariffs.

The duties have cascaded through the supply chain, Jantz said, raising the price of items like ceiling and acoustic tiles, which often use China-made fiberglass, or lighting systems, which can have internationally sourced components. The Trump administration has imposed a 20% tariff on imports from China.

Ceiling tile systems also employ steel or aluminum grids to suspend them, which have become more expensive.

Jantz said that construction costs have risen by about 3% on average annually in New York City for decades. This year he forecasts increases of around 5%.

"That is largely based on the tariffs and a little bit of greedflation that we're seeing," Jantz said, referring to domestic manufacturers and suppliers who have been opportunistic by raising prices because foreign competition has grown more expensive.

The higher costs have also had an impact on the construction of apartments, as Business Insider reported in February.

A lack of clarity on tariffs

Trump's return for a second term in the White House created widespread optimism across the commercial real estate industry. But a turbulent month and a half in office has rattled investors.

Trump has upended global alliances by placing tariffs on close US trading partners, including Mexico, Canada, and Europe. As major stock indexes have tumbled as a result of his policies, Trump appeared to suggest that he was willing to accept a contraction of US growth to meet his objectives, telling Fox News that the country may endure a "period of transition."

He has also zig-zagged on major policy announcements that have disoriented executives and raised uncertainty in the business sector. Trump's administration, for instance, announced a 50% tariff on Canadian steel on March 11, only to call off the sweeping action later in the day.

Construction experts say that such whiplash moves encourage developers to wait on the sidelines in the hope that other tariff actions and charges will also be pulled back.

"The lack of clarity on the tariffs and the resulting impact of those tariffs, it's driving uncertainty," said Joseph Mizzi, the president of Sciame Construction. "If someone has to guess with a lack of certainty, they're typically going to — in the contracting world — guess in a more conservative way."

Mizzi said that he and other contracting executives he speaks with have become concerned about the situation recently. He said the industry had expected an upswing in construction in 2025 after a few years of diminished activity in the sector that was brought on, in part, as a result of higher interest rates.

"We lay in bed at night thinking about things that might happen," Mizzi said. "So yeah, it's on our radar for sure."

• Trump's 25% steel tariffs could drive apartment rents and condo prices even higher.
• Higher-rise buildings that require more steel are expected to see inflated construction costs.
• Developers may delay projects, hoping for stable prices, amid a severe housing shortage.

The US is facing a looming apartment crunch, and President Donald Trump's newly unveiled 25% steel and aluminum tariffs will likely inflate already elevated construction costs and raise rents.

Mid- and high-rise apartment and condo construction require more steel in their framing and foundation and will likely be more impacted by the tariffs than single-family homes and other low-density construction, which tend to be wood-framed, said Omar Rihani, executive vice president at Project Management Advisors, a real-estate development consulting firm.

"As you go up above five stories, and then you transition from wood construction to concrete construction, now you're going to have a lot more steel per square foot," he said.

Apartment construction boomed a couple of years ago amid surging demand and low interest rates. Landlords handed out free parking, signing deals, and other perks. But that's coming to an end. Multifamily construction starts already dropped to their lowest level in more than a decade last year.

Stubbornly high interest rates, a glut of higher-end apartments in many markets, and higher labor and other building costs have made building new units far less attractive to developers — and restrictive trade policies on building materials could worsen the trend. This means rents have nowhere to go but up.

Pricier steel could slow construction and raise rents

It's unclear exactly how much the tariffs, set to go into effect on all countries on March 12, will increase the price of steel in the US. Rihani predicts costs could increase in the low single digits for high-rise construction. Developers will ultimately pass higher costs on to renters and condo buyers to the extent they can, Rihani said.

In some cases, developers may choose to delay construction and wait to see if domestic steel production rises and prices stabilize. However, delaying a project is very costly, as property taxes, insurance, and interest still need to be paid. Some projects could be scrapped altogether or not pursued in the first place.

David Steinbach, global chief investment officer at the real-estate investment manager Hines, is more optimistic that strong demand for homes will keep development moving.

"While tariffs may slow some projects, we believe demand drivers are still strong enough to drive development and acquisitions," Steinbach said in a statement to Business Insider.

We've been here before. In 2018, Trump imposed 25% tariffs on steel, though he later exempted Canada and Mexico from those taxes. Despite the exemptions, the tariffs raised the commodity price of steel and increased construction costs as a result. The levies were later removed by the Biden administration. Some in the industry believe the steel prices will be tempered by the temporary increase in domestic production that occurred in the US after Trump's 2018 tariffs.

"We view steel as a medium-level risk construction material given tariffs from the President's first term had already provided significant demand for steel back to the US over the past decade," Steinbach said.

However, any increase in construction costs could hamper the effort to address the country's housing shortage and bring down costs for homebuyers and renters.

"We need to continue to build housing, and anything that holds back the creation of housing, in the long run, is not good for our nation," said Jay Lybik, director of multifamily analytics at real estate analytics firm CoStar.

A broader tariff environment

Earlier this month, Trump imposed 10% tariffs on China, which are already raising construction costs, some homebuilders report.

Meanwhile, tariffs on other key construction materials are also possible. Trump has threatened to impose 25% tariffs on Canada and Mexico, which would raise the prices of widely used building materials like Canadian lumber and Mexican gypsum used for drywall. There are also the expected downstream impacts of tariffs increasing broader inflation and keeping interest rates higher for longer, which will further raise costs for homebuilders and consumers.

The homebuilding industry urged Trump to reverse course. The National Association of Homebuilders sent a letter to Trump in January requesting he exempt "critical construction materials" from his tariffs. The major industry group has since condemned the president's metal tariffs as running counter to his pledge to bring down housing costs.

"Through an executive order on his first day in office, President Trump made it a top priority to reduce housing costs and increase housing supply to ease the nation's housing affordability crisis," the NAHB said in a statement to Business Insider. "His move to impose 25% tariffs on all steel and aluminum products imports into the U.S. runs totally counter to this goal by raising home building costs."

Even if Trump ends up coming to a deal with the US's North American partners and abandoning his proposed levies, the uncertainty surrounding his policy choices could inflate building material costs by disrupting supply chains and homebuilder timelines, even as the US struggles to build its way out of a severe housing shortage.

For now, developers are doing what they can to ensure the projects they already have in motion are protected from price hikes. Some of Rihani's developer clients are stockpiling lumber.

"Our clients are moving with a bit of urgency today, trying to get ahead of the tariffs," Rihani said. "They're looking at how do they lock in their pricing, lock in their projects, so that they mitigate future risk of tariffs."

Most single-family houses are built around a few main ingredients: wooden framing, a sloping roof that hangs over the sides, vents that keep air circulating through the attic. These features are key to churning out new builds quickly and relatively cheaply, and they've remained more or less the same for decades. They also make it easier for homes to burn.

The fires that swept through the Los Angeles area were the result of an extreme scenario: The confluence of hurricane-force winds, dry brush after months of drought, and the construction of old homes near combustible wildlands set the stage for the blazes to spread rapidly. The devastation in Altadena, the Pacific Palisades, and Malibu, where the Eaton and Palisades fires have destroyed more than 16,000 structures and killed at least 28 people, is especially stark given that California's building standards are some of the strictest in the world. In much of the rest of the country, the housing stock is even less equipped to face the rising threat of fire.

The ongoing fires bear a warning for other cities that have pushed residents farther and farther from the urban core in search of space to build. The risk of fire damage is greatest in areas known as the wildland-urban interface, or WUI — pronounced, charmingly, as "woo-ey" — where human-made sprawl meets undeveloped land. Data from the US Forest Service indicates the number of homes in WUIs grew by almost 50% from 1990 to 2020; about 48 million homes, or almost a third of residential units nationwide, are in counties that face a high risk of fire. Homeowners in California and beyond, architects and researchers tell me, must begin wrestling with how to fortify their own houses.

"As we've seen with LA and some of the other fires in California and Maui, it's not just a WUI issue anymore," Michael Eliason, the founder and principal of the Seattle architecture firm Larch Lab, tells me. "These are quickly becoming urban fires."

Perhaps the most confounding images from the LA fires show the outliers: homes miraculously left standing in the middle of flattened neighborhoods. Architects I've talked to generally agree that chance played a big role in deciding which structures survived. But as Sean Jursnick, a Denver-area architect, puts it, the owners of the spared houses may have "created some of their own luck."

Measures to reduce the risk of fire damage include straightforward design tweaks such as streamlining exteriors to eliminate the nooks and crannies where stray embers can settle, or getting rid of vegetation that could shuttle flames to the main structure. Then there are the cutting-edge materials — wrapped in jargon like "cementitious fiber-reinforced composite building system" — that offer alternatives to the flammable lumber that dominates home construction.

Interventions by both homeowners and builders are growing more necessary as the risk of fires increases — and as insurers get pickier about which properties they'll cover. Soon, many people across the US may have no choice but to build smarter.

Scott Long has spent decades in pursuit of a material capable of unseating lumber as the go-to option for home frames. The basics of home construction haven't substantially evolved since the 1800s, when building the skeletal structure out of dimensional lumber — your classic two-by-fours, etc. — came into fashion. Wood components, Long says, are "literally the worst possible product you could use" in the event of high winds, flooding, or fire since they burn (unlike concrete) and aren't as sturdy as, say, steel. Masking wood with something like magnesium oxide board or stucco siding, both of which are more resistant to fire, is fine, Long says, but "not a solution."

"It's time for change here," Long tells me. "We can't keep building the way we've been building up against these types of historic events."

Given these problems, Long founded NileBuilt in 2019, building homes primarily out of fiber-reinforced concrete panels with foam insulation in the middle. The company's model homes look simple and modern, all flat roofs and sharp edges, and it says the materials can withstand temperatures of more than 2,000 degrees Fahrenheit — the panels, unlike the walls of traditional homes, won't combust from the extreme heat of a neighboring fire. Long says the cost of building his homes roughly matches that of wood-frame houses. A quiet start to 2025 for his company has turned into a frenzy; he says that even before the fires, the waitlist for one of the homes was just under 3,000 people.

Eliason isn't calling for the kind of paradigm shift in building materials that Long suggests. He pointed to a widely seen X post showing a Pacific Palisades home that survived with little apparent damage, saying it was "not a concrete house or brick house or anything" — other measures its owner took may have mattered a lot more. And wood has its own advantages: It's cheap, and lumber production doesn't release nearly as much carbon as concrete or steel. In the event of an earthquake, its pliability is a huge plus. For all these reasons, Eliason says, "going away from wood-frame construction seems really shortsighted."

Instead, he advocates more-modest tweaks that can add up to real risk mitigation. A streamlined, boxy structure offers fewer places for stray embers to linger. These embers are often good fuel for a wildfire's spread — they can travel several miles by air, then enter through vents or settle on a combustible part of the home, igniting another conflagration. By getting rid of nooks and crannies like roof overhangs (also known as eaves) or little windows that jut out of the roof, builders can reduce fire risk. Materials also matter: Builders can wrap a home in noncombustible mineral wool and install drywall capable of withstanding an hour of direct contact with flames. Metal roofs are preferable to classic shingles.

The house Eliason referred to has many of these features: stucco finishes, a metal roof, tempered windows, no roof vents or eaves on its sides. But there's an even smaller adjustment that may have helped keep the flames away: a buffer around the house devoid of vegetation. Jursnick recalls a conversation with another architect who likened nearby plants and bushes to the tinder you'd use to light a campfire. Removing those is an example of a little thing even weekend-warrior home-improvement types can do to better protect their homes. Another is replacing old vents with newer models designed to deny entry to embers. Costlier measures include swapping in a metal fence for the wooden version or opting for a new metal roof.

Decades-old homes, like many in the Pacific Palisades and Altadena, are much more susceptible to fires than newer builds. But retrofitting them to meet modern codes is more expensive than adding fire-resistant features to new construction from the get-go. Research from the environmental economists Patrick Baylis and Judson Boomhower suggests that California homes built after the state tightened its building codes in 2008 are about 40% less likely to be destroyed in a fire than a 1990 home exposed to an identical blaze. Another study of the 2018 Camp Fire, which destroyed most of the town of Paradise in northern California, found that only 11.5% of single-family homes built within city limits before 1997 survived, compared with a 38.5% survival rate for those built that year or later.

Boomhower walked away from his study convinced that more local governments should mandate fire-resistant building codes rather than wait for builders and homeowners to wise up to their benefits. Normally, an economist like him might be skeptical of government rules for something that is so obviously a good investment — buyers of new homes should be motivated to protect what is likely their biggest asset, codes be damned. But Boomhower's study found limited adoption of these best practices in areas that didn't require them.

"Homebuilders and home buyers are just not always aware of the risks and aware of the low-hanging-fruit options for mitigation," Boomhower tells me. The data also suggests there are spillover effects that could protect non-improved homes: Investments made by just one homeowner can help stunt the spread of a blaze, making it less likely that their neighbors' homes burn down. And insurers may be more willing to extend policies to homeowners in areas where they know many builds meet these criteria.

This is far from just a California issue. A handful of states, including Montana, Nevada, and Pennsylvania, and 200 local jurisdictions have adopted the International Code Council's standards for building fire-resistant homes in WUIs. Austin, for example, adopted the code in 2015 and is considering an update that would expand the WUI's borders in hopes of protecting more homes. Homeowners that go beyond even the strictest codes, either during the initial construction or as part of a retrofit, may score discounts from insurers or state-level tax breaks.

But even with city-level and homeowner-level interventions, Eliason tells me, "there's no guarantee of protection." The logical thing, he says, would be to build more densely in areas far from the WUI to limit the number of homes at risk in the first place. In the absence of that kind of fix — which would involve sweeping changes to the zoning laws that say what you can build and where — better materials and design can make a difference.

Jursnick, the Denver-area architect, has been thinking about this stuff a lot recently. He's working on plans for an apartment building in an area just outside Boulder that was burned in 2021 by the Marshall Fire, which destroyed more than 1,000 homes. Much of the community input, he says, has revolved around how to prevent that kind of tragedy from happening again.

"If we're going to keep building more homes in those areas," Jursnick tells me, "I think we need to be more thoughtful of how we build, and adapt our building strategies in those areas to acknowledge that risk."

James Rodriguez is a senior reporter on Business Insider's Discourse team.