The Cost Just Got Built Into the Land

The Cost Just Got Built Into the Land

Tariffs just handed land investors a quiet edge. And most people haven't figured it out yet.

Cushman & Wakefield dropped new numbers this month. Current tariff rates are pushing CRE construction materials costs up 6% above 2024 baseline, with total project costs rising roughly 3%. JLL puts the aggregate hit at 8% once tariffs fully work through the supply chain. Steel and aluminum are sitting at 50% Section 232 tariffs. Lumber derivatives at 25%. Copper and electrical components squeezed from every direction.

Here's what that means in real dollars. A developer working on a New Jersey warehouse saw tariffs add nearly $2 million to one building's cost. A $100 million DC-area project got hit with a 15% structural steel price hike mid-contract. These aren't edge cases. They're the new normal.

Construction spending dropped 4.7% in 2025. JLL forecasts only a 0.4% bounce in 2026. The pipeline is thinning. And when pipelines thin, the dirt that's already in position becomes something developers will pay a premium to control.

CBRE projects CRE investment activity increasing 16% in 2026 to $562 billion. Capital is coming back. But it's coming back selective. Lenders are looking for clean entitlements, confirmed power, shorter construction timelines. The parcels that check those boxes are competing in a smaller pool with a bigger wallet on the other side.

When the Market Gets Expensive, Cheap Land Gets Expensive Too

When it costs 8% more to put steel in the ground, the developer's equation changes. The margin they used to capture on construction? Gone. The margin they need to make the deal work? Has to come from somewhere. And where it comes from is a lower basis in the dirt. Which means land with a clear value story commands the room.

Most investors look at tariff headlines and think "slowdown." Second-order thinkers ask: slowdown for who? Slow pipelines mean less competition for ready sites. Higher costs mean developers can't afford to take on entitlement risk. They need to buy certainty. You can sell certainty.

Constraints don't destroy value. They redirect it. Every tariff, every construction delay, every thinning pipeline sends capital looking for the path of least resistance. Make sure your dirt is that path.

1. Run a Tariff Impact Audit on Your Portfolio. Pick two or three sites you're holding or targeting. Model what happens to a developer's pro forma if construction costs are 8% higher than they were in 2024. Does your land still pencil in their deal?

2. Confirm Your Infrastructure Story. Call your utility provider this week. Ask two questions: What's the available capacity at the nearest substation, and what are current interconnection timelines?

3. Sharpen Your Positioning Against the New Cost Environment. Update your comp analysis using 2026 data, not 2024. Developers are re-underwriting everything right now.

Here's to building your success, one step at a time... from the dirt up.

Kris "Dirt Dawg" McGee 🐾