Construction cost increases across the Americas have slowed as inflation eases, but industry experts warn that new tariffs and labor shortages could pose fresh challenges in 2025.

A new survey from commercial real estate firm Cushman & Wakefield found that while costs are rising at a slower pace than their five- and ten-year averages, general contractors remain concerned about escalating labor expenses and material prices. Tariffs on key imports from Canada and Mexico could add to the financial strain, along with ongoing shortages of commodities like steel, copper, lumber, and cement.

“While we’re seeing the pace of inflation slow on construction costs, there remain serious headwinds and uncertainty about the impact of tariffs and labor shortages on the construction industry,” said Brian Ungles, president of Project & Development Services, Americas at Cushman & Wakefield.

The report also noted a significant decline in new office construction, with the pipeline shrinking by 40% year-over-year. As a result, many companies are shifting focus to renovating and upgrading existing office spaces rather than securing newly built properties. This trend has driven an increase in tenant improvement (TI) allowances, particularly in Class A office spaces, where landlords have raised TI packages by 7% on average, with some markets seeing increases of up to 20%.

Despite these adjustments, fit-out costs remain high, requiring businesses to carefully assess their out-of-pocket expenses when planning office upgrades. The latest edition of Cushman & Wakefield’s Americas Office Fit Out Cost Guide provides cost benchmarks across 58 markets to help occupiers refine their capital planning and relocation budgets.

The report highlights industry concerns over prolonged permitting times, which continue to cause project delays and uncertainty. With a shrinking office construction pipeline and rising costs across all property sectors, competition for construction materials and labor is expected to remain intense in the coming year.