Tariffs Already Putting Pressure on Commercial Construction Pricing

President Donald Trump’s recently imposed tariffs on foreign steel and aluminum have not yet gone into effect. But they are already affecting deal negotiations, bottom lines and construction pricing in commercial real estate. Some in the sector say they have seen around a 10 percent increase in the price of steel—a material whose prices have already been rising—since the tariffs were announced earlier this month. The price increase—and the uncertainty over future increases—has caused some to rework and reconsider planned projects. Paul Rohrer, a real estate partner at the law firm Loeb & Loeb in Los Angeles, has been working on a $300 million, 500,000-sq.-ft. high-rise office building in Los Angeles for nearly a year. The goal had been to build the office for a set price—the firm’s clients tend to be entities like the government that don’t typically work in real estate and seek such contracts to reduce their risk. Now that the firm is working on the underwriting stage for the bond that will finance the project, a contractor has notified Rohrer that the project cannot be built at a fixed price—a “steel tariff contingency” needs to be added.