➤ Key Highlights
Material costs for steel, concrete, lumber and key mechanical/electrical components are projected to stay elevated or rise again due to tariffs and supply volatility.
Government job and spending cuts portend a sluggish 2026 with regard to federal projects.
Major cities across the United States are also reporting flat revenue going into 2026.
In the private sector, tighter lending standards (combined with only gradual easing of interest rates) are expected to constrain project financing and squeeze contractor margins, especially in the commercial and residential sectors.
Tariff uncertainty and trade policy are expected to keep input prices volatile and complicate long-term contracting.
The industry continues to face a severe shortage of skilled craft workers and supervisors, driven by an aging workforce and too few young entrants, with projections indicating a need for hundreds of thousands of additional workers by 2026 in the U.S. alone.
Construction wages are rising faster than the broader economy, and tighter immigration policy has added more upward pressure.
Contractors are confronting persistent and rising material costs driven by tariffs and supply volatility. Government spending cuts and flat municipal revenues are expected to slow federal projects and limit public sector activity. Labor shortages and rising wages continue to impact project delivery, with private sector financing also under pressure from lending constraints.
This event illustrates how construction execution risks are increasingly shaped by the interplay of uncertain policy decisions and unstable supply conditions. Policy shifts, such as those affecting tariffs, trade, and labor, add layers of complexity to project planning and execution. Meanwhile, fluctuating material costs and workforce shortages amplify these execution risks, making long-term project stability harder to achieve. The evolving landscape demands a continuous reassessment of risk exposure as both government and market forces drive unpredictability.
⚠️ Why it matters
For CRE professionals, understanding the shifting risk dynamics is essential for navigating project execution amid volatile supply chains and regulatory environments. The ability to anticipate and respond to these policy and supply uncertainties directly affects project timelines, costs, and feasibility. Stakeholders must recognize how these evolving factors could influence risk assessments, contract structures, and resource planning.
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➤ TAKEAWAY
Market participants may continue to monitor policy developments and supply chain trends to inform their project planning and risk management approaches. As execution risks persist due to uncertainty in both policy and supply, a focus on flexibility and adaptability could become increasingly important. Ongoing analysis of labor availability and material pricing may further inform future project strategies and decision-making.
