Construction Pros Warn Of Turbulence Ahead. Just Don’t Say 'The T-Word'

Mere hours before President Donald Trump announced a 90-day partial pause on sweeping reciprocal tariffs that rocked commercial real estate, CRE pros were reluctant to speak their name, referring to the levies only as the “T-word.” 

But the economic uncertainty tariffs have helped contribute to was clearly on the table at Bisnow’s Chicago Construction & Development event last week as panelists leaned into the benefit of collaboration throughout the development process to navigate a landscape that’s getting trickier all the time.

“Everything has gotten more complicated, everything is more complex,” said Sebastian Salvadó, creative director at Rios, at the event held at Continua Interiors.

“Whether it's the regulatory situation, the financial situation — which is just getting started — it's going to get more complicated. You have to form these alliances early to have that shared intelligence to work through these things.”

Matt Wilke, chief operations officer and partner at LG Group, was one of the few to mention tariffs by name, detailing how they are raising prices on a recent project. So far, the impact is relatively small.

Wilke has a $140M construction project in the works in Nashville and said the tariffs present about a $1.4M, or 1%, added cost to the development.

The larger issue is the trade policy’s disruptive influence on the market.

“It's more of the chaos and uncertainty that just gives another reason to pause funding more developments and stop businesses from thinking about expanding,” Wilke said. “That's really what it comes down to. That's the problem.”

Snell Properties, a developer in Arlington, Virginia, paused construction of a pair of residential high rises late last month until “market uncertainty stemming from tariff talk and cuts to the federal workforce play out,” the developer told the Washington Business Journal.

Intel also announced late last month that it would delay its Ohio One semiconductor plant in New Albany, Ohio, citing unpredictable political concerns, including tariffs. 

To navigate the chaotic environment, the key is to find trustworthy partners and begin transparent profit and fee discussions at the outset of projects, Wilke said. 

“The old school ways of the design, bid, build process in our industry is almost totally out of the norm,” Wilke said. “I think most people on this panel agree that we're seeing a lot more collaboration starting extremely early on in the project.” 

Kinjal Patel, president at James McHugh Construction, said that collaboration starts with pulling forward information as far down the supply chain as possible and as early in the process as achievable. Once potential risk areas are identified, it’s important to not overcorrect as the project progresses. 

“[It’s] being transparent on where the risks are and where the opportunities are, and figuring out a way for all the stakeholders to somehow share in that risk and opportunity, and that kind of evens out the lumpiness of the risk,” Patel said. 

The flip side of the pressures developers and investors feel now is that these major moments can drive innovative changes in the way people work and create unique partnerships, Salvadó said.

But to effectively utilize these partnerships, developers need a strong vision for their projects’ end goals.

Without that vision, the project can struggle, Salvadó said.

“That can actually create inefficiencies, or [you] end up with something that isn't as powerful as what you set out to do because it got watered down, because there's too much autonomy, and not everyone's playing the same sport,” Salvadó said.