The continued rise in construction costs has made D.C.’s ongoing projects more expensive, and developers say the next wave of new projects will be hit the hardest.
Development deals that are in the planning stages, from pre-acquisition to design to entitlements, are becoming significantly harder to pencil out, and D.C.-area developers expect this will lead to a regionwide slowdown in new construction.
Skanska, which has multiple D.C. developments in the works and operates its own construction division, estimates construction costs have been rising by 4% to 4.4% annually.
“We’ve seen the escalation in construction costs be a lot higher than originally projected,” Skanska Executive Vice President Mark Carroll said. The construction cost increases will likely worsen with the increased tariffs on Chinese imports that President Donald Trump announced last month, several commercial real estate leaders agreed. In addition to rising costs of materials, the shortage of construction workers is exacerbating the problem with rising labor costs.
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