Tariffs could raise construction costs; Office traffic matches post-pandemic peak

Construction contractors and developers this year have generally benefited from a slowdown in cost inflation for key building materials and related services. But some industry analysts are warning that building material prices could rise in the coming year, depending on the fate of tariffs on foreign goods proposed by the incoming administration of President-elect Donald Trump.

“The next administration’s trade policy increases uncertainty regarding construction material costs,” Anirban Basu, chief economist for the Associated Builders and Contractors trade group, said in a statement. “Beyond the implications of potential tariffs, input prices may rise in the short term if purchasers rush to import materials prior to the implementation of those policies.”

The Washington, D.C.-based trade group this month said contractors as of October expected their profit margins to expand through the first quarter of 2025, but observers will closely watch those in the coming months as shifts in trade policy materialize.

Producer price data reported this month by the Labor Department showed overall construction costs rising by a slim 0.3% in October compared with the prior month, as costs declined 0.2% from a year earlier. A key exception was energy prices, which affect costs to produce and transport some types of construction materials and were up significantly, with crude petroleum prices rising 7.3% from September.

The trade group said overall construction-related prices have fallen 5% since reaching an all-time high in June 2022, but trade tariffs could upset that trend. After prior plans to significantly hike tariffs on goods from China, which is among the world’s largest producers of cement and steel, Trump said this week he plans to impose a new 25% tariff on imported goods from Canada and Mexico.

Other analysts said tariffs could impose new expenses on supply chains for numerous industries in addition to raising consumer costs. Canada is a key source of U.S. imports such as oil, wood and plastics, while Mexico is a major supplier of electronics, business machinery and furniture, according to United Nations trade data. 

Office attendance in big cities averaged 53% of pre-pandemic levels for the week ended Nov. 20, matching the post-pandemic peak reached in the week ended Jan. 31, according to Kastle Systems.

The 10-city average has hovered around 50% for most of the past year in the security technology firm’s Back to Work Barometer, with the average falling below that level during holiday weeks and occasional periods of severe weather.

Entrenched remote and hybrid work policies have caused attendance to plateau nationwide, with Kastle and other analysts noting Tuesday through Thursday remains the highest-traffic period for in-office work, though some employers have tried with mixed results to toughen policies and bring more work into offices.

Based on anonymous keycard data from Kastle’s office property clients, the latest data showed Texan cities remain at the top for attendance, with Austin at 63.3% of pre-pandemic levels, Dallas at 62.3% and Houston at 62.1%. Next came Chicago at 56.4%, New York at 55.2% and Washington, D.C., at 50.6%.