How do tariffs actually affect a commercial real estate deal?

Mostly through construction materials. Steel, aluminum, and copper carry a 50 percent tariff in 2026 and softwood lumber 10 percent. Cushman and Wakefield estimates the schedule raises materials cost about 6 percent and total project cost about 3 percent, with steel-heavy buildings seeing 4 to 8 percent. Higher replacement cost also raises the floor under buildings already standing.

Why does the Middle East conflict matter for U.S. real estate?

Oil settled above $100 in October 2026 after Gulf attacks, with Goldman Sachs estimating a $24 per barrel risk premium. That flows into diesel, logistics tenants, and common-area and energy expenses, and it adds uncertainty to capital markets. CBRE says the U.S. and Iran conflict made its 2026 outlook considerably more uncertain, though its base case still sees cap rates holding steady.

What does the U.S. and China trade truce have to do with Southwest real estate?

The semiconductor and data-center demand reshaping Phoenix and Nevada depends on rare earths and critical minerals that currently flow because export controls are suspended under a truce running to late November 2026. If the deadlines lapse without renewal, the supply behind the fabs and data centers tightens, so the calendar matters alongside the groundbreakings.

Is foreign capital still buying U.S. commercial real estate?

Yes. Savills data cited by Commercial Property Executive puts direct foreign investment at about $16.1 billion in the first half of 2026, up 23 percent year over year, with Canadian buyers rebounding above $6 billion. But foreign capital is still only 6 to 7 percent of U.S. volume, so the marginal bidder on most deals remains domestic.

How is immigration enforcement affecting construction?

Immigrants are about 34 percent of construction workers and more than 60 percent in trades like drywall and roofing. The AGC and Sage 2026 outlook found 33 percent of firms reported enforcement-related workforce disruption in the prior six months. The main cost shows up as delays, so we model labor escalation and longer timelines as base-case inputs.

The Geopolitics Reaching Your Pro Forma in Late 2026: Tariffs, Oil, Rare Earths, and Capital

Key Takeaways

Steel, aluminum, and copper carry a 50 percent tariff in 2026; Cushman and Wakefield estimates the schedule adds about 6 percent to materials and 3 percent to total project cost, more for steel-heavy builds.
Brent crude settled at $109.86 on October 16, 2026, its highest since May, after Houthi strikes and tanker attacks near the Strait of Hormuz; Goldman Sachs estimates a $24 per barrel war-risk premium.
The U.S. and China truce that keeps rare earths and critical minerals flowing runs only to late November 2026, and that supply sits under the Southwest's chip and data-center buildout.
Direct foreign investment in U.S. CRE was about $16.1 billion in the first half of 2026, up 23 percent year over year, but still only 6 to 7 percent of total U.S. investment, per Savills.
Immigrants are about 34 percent of construction workers; the AGC and Sage 2026 outlook found 33 percent of firms reported enforcement-related workforce disruption, making labor a base-case escalation, not a contingency.

Geopolitics does not reach a commercial real estate deal through headlines. It reaches it through a handful of specific lines in the model: what the steel costs, what diesel costs, whether the chips and transformers show up, who is bidding against you, and whether the crew shows up. Several of those lines are moving at once. Here is where each one lands.

Tariffs land in your hard costs

The clearest channel is construction materials. As of 2026, steel, aluminum, and copper items made mostly or entirely from those metals carry a 50 percent tariff, derivative products carry 25 percent, and softwood lumber carries 10 percent, per the 2026 construction cost outlook summarized by Tax Credit Advisor. Cushman and Wakefield estimates the current tariff schedule raises materials costs about 6 percent versus a 2024 baseline and total project costs about 3 percent. The Associated General Contractors (AGC) puts the industry-wide bill near $4.8 billion a year, roughly 0.3 percent of total construction spending, but that average hides the concentration: on a steel- or aluminum-heavy building the hit runs 4 to 8 percent of total project cost. JLL frames the range as plus 5 to plus 25 percent depending on the material.

The underlying prices moved too. Gordian data cited in the same outlook shows aluminum mill shapes up 30.5 percent year over year through December 2025, and framing lumber at $916.62 per thousand board feet in April 2026, up 4.21 percent year over year. ABC chief economist Anirban Basu has warned that higher material costs could compress contractor margins in the second half of 2026.

We should be honest that the exact rates are a moving target. These figures come from advisory and trade sources that do not fully agree with each other, and the tariff schedule itself has expiration dates attached. Treat the number as a range to sensitize, not a fixed input.

For an owner of standing assets, higher replacement cost is not only a cost. It raises the floor under every building already up. When it costs more to build the competing box across the street, the rent and value of the one you already own are easier to defend.

Oil and the Gulf land in your operating statement

Brent crude settled at $109.86 and West Texas Intermediate at $101.41 on October 16, their highest since May, after Iran-backed Houthi strikes on Riyadh's airport and a run of tanker attacks near the Strait of Hormuz, per Reuters reporting carried by Nation Thailand and the Qatar News Agency. Goldman Sachs pegs the war-risk premium in Brent at about $24 a barrel. The G7 agreed to release 100 million barrels of diesel and crude from emergency reserves, and the IEA's October report still forecasts world oil demand falling 2.5 million barrels a day year over year in the fourth quarter, so the move is a supply-risk story rather than a demand story.

Oil is not just a gas-pump number for real estate. Diesel runs through every trucking tenant's P&L and through the common-area maintenance you pass along, and energy is a direct line in multifamily and retail operating statements. The larger effect is on capital-markets nerves. CBRE's midyear 2026 review says the U.S. and Iran conflict has made its outlook considerably more uncertain than at the start of the year, though its base case still assumes no widespread energy shortage and still calls for cap rates to hold roughly steady through 2026 before compressing in 2027.

The US-China truce keeps the chip and data-center buildout on the rails

What holds together the Southwest's biggest demand story, semiconductors and data centers, is a trade truce measured in weeks. Treasury Secretary Scott Bessent said the U.S. and China truce was extended to January, and China's October 2025 rare earth export controls remain suspended under a deal running to November 27, 2026, per China Briefing and CNBC coverage. A related U.S. tariff suspension runs to November 10 and the Commerce Department's affiliates rule to November 9. This is not settled: in June 2026 China added ten U.S. firms, including MP Materials and USA Rare Earth, to its export-control list.

Rare earths and critical minerals feed the magnets, chips, and grid equipment behind the fabs and data centers reshaping Phoenix and Nevada land markets. We have written separately about TSMC's $265 billion Arizona commitment and about data centers turning electricity into an underwriting variable. The geopolitics underneath both is a supply of minerals that currently flows because a deadline has not yet passed. For anyone underwriting around that demand, the renewal dates on the calendar matter as much as the groundbreakings.

Foreign capital is still buying, just not much of the market

Cross-border money did not leave. Savills data cited by Commercial Property Executive puts direct foreign investment in U.S. CRE at about $16.1 billion in the first half of 2026, up 23 percent year over year, though foreign buyers remain only 6 to 7 percent of total U.S. investment. Canadian capital, which pulled back in 2025 amid tariff and bilateral tension, came back hard: CBRE's Bill Shanahan said 2026 Canadian volume already topped $6 billion, against roughly $2 billion in all of 2025. CBRE still holds its forecast of a 16 percent rise in U.S. investment volume for 2026.

For a sponsor, that means the marginal bidder on institutional product is still mostly domestic, and foreign flows are a tailwind at the edges rather than the force setting price.

Immigration enforcement lands in the trades

Labor is the quietest geopolitical input and one of the largest. ABC estimates the industry needs about 349,000 net new workers in 2026 and 456,000 in 2027. Immigrants are about 34 percent of the construction workforce nationally and more than 60 percent in trades like drywall, roofing, and plastering. The AGC and Sage 2026 outlook found 33 percent of firms reported workforce disruption from immigration enforcement in the prior six months, up from 28 percent earlier in the year. Wage data diverges: BLS-based figures show construction wages up 3.1 percent year over year in the first quarter of 2026, down from 4.3 percent, while market-oriented surveys report specialized trades up 9 to 11 percent. Either way, schedule is the real cost: one outlook reports 45 percent of firms citing delays caused directly by worker shortages.

The practical response is to model labor escalation and a longer construction timeline as base-case inputs, not as a contingency line you hope not to use.

What we do with all of it

None of these are forces we control, so we underwrite the deal to survive them. That means leaning on standing, cash-flowing assets where a higher replacement cost defends our rent; favoring markets where power and demand are real, not just where land is cheap; carrying a wider cost range and a longer timeline on anything we build; and sensitizing every deal to oil-driven expenses and a sticky long rate rather than to one clean exit. Tariffs are also inflationary, which tends to keep long Treasury yields firmer than the Fed alone would, and the long rate is what prices CRE debt. We keep the current numbers on our live Market Rates dashboard and the mechanics in our cap-rate explainer rather than recap them here.

Sources

Tax Credit Advisor, "2026 U.S. Construction Costs, Q2 Update" (2026 tariff rates; Gordian aluminum and lumber price data)
Cushman and Wakefield (materials and total project cost impact, via 2026 construction cost outlook coverage)
Associated General Contractors of America (AGC) (industry-wide cost estimate; AGC and Sage 2026 Construction Outlook on immigration enforcement)
JLL (material cost range, plus 5 to plus 25 percent)
Associated Builders and Contractors (ABC) and chief economist Anirban Basu (margin warning; net new worker estimates)
Nation Thailand, "Oil gains as Middle East conflict and tanker attacks lift Brent" and Qatar News Agency, "Oil Prices Surge as Middle East Tensions Raise Supply Concerns" (Brent and WTI levels, Houthi and Strait of Hormuz attacks, Goldman Sachs risk premium, G7 reserve release)
International Energy Agency, "Oil Market Report, October 2026" (world oil demand forecast)
CBRE, "U.S. Real Estate Market Outlook Midyear Review 2026" (uncertainty from the U.S. and Iran conflict, cap rate path, 16 percent volume forecast, Bill Shanahan on Canadian capital)
China Briefing, "Trump-Xi Meeting: US and China Agree to Tariff, Rare Earth Concessions," and CNBC (truce extension, rare earth suspension and tariff deadlines)
Commercial Property Executive and Savills, "Foreign Capital Shifts CRE Priorities" (cross-border investment total and share of U.S. volume)
U.S. Bureau of Labor Statistics and the AGC and Sage 2026 outlook, via construction outlook coverage (construction wage growth, project delays)

Frequently Asked Questions

How do tariffs actually affect a commercial real estate deal?: Mostly through construction materials. Steel, aluminum, and copper carry a 50 percent tariff in 2026 and softwood lumber 10 percent. Cushman and Wakefield estimates the schedule raises materials cost about 6 percent and total project cost about 3 percent, with steel-heavy buildings seeing 4 to 8 percent. Higher replacement cost also raises the floor under buildings already standing.
Why does the Middle East conflict matter for U.S. real estate?: Oil settled above $100 in October 2026 after Gulf attacks, with Goldman Sachs estimating a $24 per barrel risk premium. That flows into diesel, logistics tenants, and common-area and energy expenses, and it adds uncertainty to capital markets. CBRE says the U.S. and Iran conflict made its 2026 outlook considerably more uncertain, though its base case still sees cap rates holding steady.
What does the U.S. and China trade truce have to do with Southwest real estate?: The semiconductor and data-center demand reshaping Phoenix and Nevada depends on rare earths and critical minerals that currently flow because export controls are suspended under a truce running to late November 2026. If the deadlines lapse without renewal, the supply behind the fabs and data centers tightens, so the calendar matters alongside the groundbreakings.
Is foreign capital still buying U.S. commercial real estate?: Yes. Savills data cited by Commercial Property Executive puts direct foreign investment at about $16.1 billion in the first half of 2026, up 23 percent year over year, with Canadian buyers rebounding above $6 billion. But foreign capital is still only 6 to 7 percent of U.S. volume, so the marginal bidder on most deals remains domestic.
How is immigration enforcement affecting construction?: Immigrants are about 34 percent of construction workers and more than 60 percent in trades like drywall and roofing. The AGC and Sage 2026 outlook found 33 percent of firms reported enforcement-related workforce disruption in the prior six months. The main cost shows up as delays, so we model labor escalation and longer timelines as base-case inputs.

Key Takeaways

Steel, aluminum, and copper carry a 50 percent tariff in 2026; Cushman and Wakefield estimates the schedule adds about 6 percent to materials and 3 percent to total project cost, more for steel-heavy builds.
Brent crude settled at $109.86 on October 16, 2026, its highest since May, after Houthi strikes and tanker attacks near the Strait of Hormuz; Goldman Sachs estimates a $24 per barrel war-risk premium.
The U.S. and China truce that keeps rare earths and critical minerals flowing runs only to late November 2026, and that supply sits under the Southwest's chip and data-center buildout.
Direct foreign investment in U.S. CRE was about $16.1 billion in the first half of 2026, up 23 percent year over year, but still only 6 to 7 percent of total U.S. investment, per Savills.
Immigrants are about 34 percent of construction workers; the AGC and Sage 2026 outlook found 33 percent of firms reported enforcement-related workforce disruption, making labor a base-case escalation, not a contingency.

Tariffs land in your hard costs

Oil and the Gulf land in your operating statement

The US-China truce keeps the chip and data-center buildout on the rails

Foreign capital is still buying, just not much of the market

For a sponsor, that means the marginal bidder on institutional product is still mostly domestic, and foreign flows are a tailwind at the edges rather than the force setting price.

Immigration enforcement lands in the trades

The practical response is to model labor escalation and a longer construction timeline as base-case inputs, not as a contingency line you hope not to use.

What we do with all of it

Sources

Tax Credit Advisor, "2026 U.S. Construction Costs, Q2 Update" (2026 tariff rates; Gordian aluminum and lumber price data)
Cushman and Wakefield (materials and total project cost impact, via 2026 construction cost outlook coverage)
Associated General Contractors of America (AGC) (industry-wide cost estimate; AGC and Sage 2026 Construction Outlook on immigration enforcement)
JLL (material cost range, plus 5 to plus 25 percent)
Associated Builders and Contractors (ABC) and chief economist Anirban Basu (margin warning; net new worker estimates)
Nation Thailand, "Oil gains as Middle East conflict and tanker attacks lift Brent" and Qatar News Agency, "Oil Prices Surge as Middle East Tensions Raise Supply Concerns" (Brent and WTI levels, Houthi and Strait of Hormuz attacks, Goldman Sachs risk premium, G7 reserve release)
International Energy Agency, "Oil Market Report, October 2026" (world oil demand forecast)
CBRE, "U.S. Real Estate Market Outlook Midyear Review 2026" (uncertainty from the U.S. and Iran conflict, cap rate path, 16 percent volume forecast, Bill Shanahan on Canadian capital)
China Briefing, "Trump-Xi Meeting: US and China Agree to Tariff, Rare Earth Concessions," and CNBC (truce extension, rare earth suspension and tariff deadlines)
Commercial Property Executive and Savills, "Foreign Capital Shifts CRE Priorities" (cross-border investment total and share of U.S. volume)
U.S. Bureau of Labor Statistics and the AGC and Sage 2026 outlook, via construction outlook coverage (construction wage growth, project delays)

Frequently Asked Questions

How do tariffs actually affect a commercial real estate deal?: Mostly through construction materials. Steel, aluminum, and copper carry a 50 percent tariff in 2026 and softwood lumber 10 percent. Cushman and Wakefield estimates the schedule raises materials cost about 6 percent and total project cost about 3 percent, with steel-heavy buildings seeing 4 to 8 percent. Higher replacement cost also raises the floor under buildings already standing.
Why does the Middle East conflict matter for U.S. real estate?: Oil settled above $100 in October 2026 after Gulf attacks, with Goldman Sachs estimating a $24 per barrel risk premium. That flows into diesel, logistics tenants, and common-area and energy expenses, and it adds uncertainty to capital markets. CBRE says the U.S. and Iran conflict made its 2026 outlook considerably more uncertain, though its base case still sees cap rates holding steady.
What does the U.S. and China trade truce have to do with Southwest real estate?: The semiconductor and data-center demand reshaping Phoenix and Nevada depends on rare earths and critical minerals that currently flow because export controls are suspended under a truce running to late November 2026. If the deadlines lapse without renewal, the supply behind the fabs and data centers tightens, so the calendar matters alongside the groundbreakings.
Is foreign capital still buying U.S. commercial real estate?: Yes. Savills data cited by Commercial Property Executive puts direct foreign investment at about $16.1 billion in the first half of 2026, up 23 percent year over year, with Canadian buyers rebounding above $6 billion. But foreign capital is still only 6 to 7 percent of U.S. volume, so the marginal bidder on most deals remains domestic.
How is immigration enforcement affecting construction?: Immigrants are about 34 percent of construction workers and more than 60 percent in trades like drywall and roofing. The AGC and Sage 2026 outlook found 33 percent of firms reported enforcement-related workforce disruption in the prior six months. The main cost shows up as delays, so we model labor escalation and longer timelines as base-case inputs.