How Rising Construction Costs are Impacting Real Estate Development

Originally published on December 5, 2023 Doug Faron for NAIOP.

In today’s environment, there are countless barriers to new commercial real estate development opportunities, including rapidly rising borrowing rates, increased constraints on banks, growing insurance costs and geopolitical risks, to name a few. On top of that, a major constraint to development today is the rising cost of construction. The upward trajectory of construction spending itself can be attributed to many factors including inflation, labor costs, rising insurance rates, materials and even permitting costs. As the cost to build becomes more expensive, developers are grappling with how to deliver high-quality buildings on time and within budget.

As a result, to achieve deadlines and stay within budget, developers must generate solutions to the industry dilemma of rising construction costs. In this article, we will dive into what’s driving construction spending, how these costs are impacting developers and solutions for maintaining development momentum.

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