In 2024, the construction industry received “positive signals from falling interest rates and material cost stability,” according to JLL’s 2025 U.S. Construction Outlook. Fast-forwarding a few months, things have changed. Though the U.S. presidential election is in the rear-view mirror, JLL and Cushman & Wakefield’s Winter 2025 Construction Insights report that the current and near-term scenarios are marked by increasing prices and continued ambiguity.

Here are some of the issues discussed by both reports.

Tariffs and their Impacts

The Trump administration has strongly supported tariffs in an attempt to improve the U.S. economy. “However, without a clear policy in place, uncertainty has hit a crescendo,” Cushman & Wakefield analysts pointed out. They went on to say that prices on materials are already increasing in anticipation.

JLL analysts also explained that, as one-third of construction materials are imported (with half of those coming from Canada, Mexico and China), “the lack of certainty on the nations and goods are facing cost increases, which complicates forecasting and budgeting for projects,”

Adding to the issue is that 2024’s stable material costs and interest rate declines meant contractors “prioritized labor retention in anticipation of work picking up,” the JLL analysts said. However, this has stretched finances, leading to more problems when acquiring higher-cost materials.

Furthermore, “the obvious strategic responses to tariffs and other trade-related problems like stockpiling are not financially feasible for most, while global conflicts and supply chain issues are significant practical barriers even for well-capitalized contractors considering their options,” according to JLL analysts.

Then There’s Labor

Labor costs and skills shortages have been building-trade issues for many years. In quoting the Royal Institution of Chartered Surveyors (RICS) Q3 2024 survey, Cushman & Wakefield analysts commented that “labor concerns continue to rank among the primary concerns limiting construction activity.”

One issue is that more labor personnel are nearing retirement age, with fewer jobs being filled. Another is that the Trump administration’s immigration policies could “contribute to labor shortages in the sector,” the Cushman & Wakefield report said. Furthermore, “technical capacity is in short supply within the construction industry,” said the JLL write-up.

A shortage of labor means an increase in wage growth. As Cushman & Wakefield analysts said: “Wage growth is expected to continue in 2025 as companies seek to fill positions from a diminishing labor pool.

Navigating the Headwinds

The JLL analysts suggested ways in which commercial real estate decision-makers could deal with challenges impacting the construction industry, including:

• Prioritize capital planning

• Consider alternative sourcing strategies

• Leverage insights from recent challenges