Prologis CEO: Immigration Policies To 'Radically' Raise Construction Costs

The head of the world's largest developer of industrial space is warning that construction is about to get much more expensive.

Prologis CEO Hamid Moghadam said the strain on the labor pool caused by the Trump administration's aggressive push to detain and deport undocumented immigrants will drive costs higher going into the second half of the year.

“Construction costs are going to go up radically,” Moghadam said Wednesday on Bloomberg TV. “We thought they were going to stabilize this year, but I think all of this immigration stuff is putting more pressure on construction.”

Since taking office, President Donald Trump vowed to launch the “largest deportation program” in U.S. history. U.S. Immigration and Customs Enforcement is detaining migrants at 60 new facilities and has been ordered to arrest at least 3,000 people a day, Bloomberg reported.

As deportations have ramped up, the construction industry has increasingly braced for higher costs. Already short about 450,000 workers, the industry risks losing 15%-23% of its labor force, according to a report by Skanska.

The administration has also taken actions to revoke work authorizations for immigrants from various nationalities, stripping more than 500,000 immigrants from Cuba, Haiti, Nicaragua and Venezuela of their legal status.

Construction is expected to slow this year as developers and contractors work through the uneven impact of Trump's tariff policies, according to JLL's mid-year construction report released this week. That has mitigated some of the impact of immigration enforcement in the short term, but it could be "punishing as starts return to normal levels," JLL experts wrote.

“Enforcement actions at jobsites have created a chilling effect, with contractors reporting increased absenteeism and project delay concerns,” JLL said in the report. “These disruptions affect both existing projects and future work capacity, compounding labor challenges that already constrain the construction sector.”

On Prologis’ earnings call on Wednesday, Moghadam and Chief Financial Officer Tim Arndt said build-to-suit projects in the industrial market are expected to make up a historically large share of new starts. The demand for those types of projects led Prologis to raise its guidance on 2025 development starts by $750M to a range of $1.8B to $2.5B, reversing a $1B cut it had made to its forecast at the end of the first quarter.

While Moghadam believes that the labor shortage makes Prologis buildings more attractive because it will cost more to replace them, he emphasized that it will cause problems beyond construction, making it harder for customers to staff their own warehouses.

“It is a real issue for our customers, because they need people to work in their warehouses, and often those are the same people that are having immigration issues,” Moghadam said. “So they’re being forced into more automation, which is not necessarily economic at this point in time.”