TIMOTHY HUTTER, LITIGATION PARTNER
“Tariffs are only part of the uncertainty in the market right now. Many clients, even those with entitled projects, have told me over the past several months that they were pausing on new construction due to interest rate concerns. Those who are already under construction are trying to mitigate the risk of tariffs as best they can. Given that these kinds of surprises can bust a project budget quickly and send everyone into panic mode, we are encouraging thoughtful consideration of materials buyouts and frequent communication with contractors.”
ARIEL SHAEPS, REAL ESTATE PARTNER
“Tariffs have created additional headwinds in an already challenging development environment with rising construction costs and interest rates. We have had a handful of projects go on hold pending further clarity as our clients and their pro formas are looking for certainty. Although the tariffs have presented as a very fluid situation, we are working with clients to mitigate their exposure through contractual protections and strategic planning. Even before signing a construction contract, we are having contractors regularly track pricing, provide detailed forecasts, and identify any early procurement opportunities.”
KELLY SMITH, LITIGATION SENIOR COUNSEL
“In response to tariffs, some developers are pausing or canceling projects until there is more clarity. Those who are moving forward are drawing on lessons learned from COVID-era price escalations and supply chain issues. They are addressing potential risks through their construction contracts by requiring timely trade buyouts, planning for early procurement and storage of key, non-domestic materials, trying to source alternative materials domestically, and including clear cost escalation clauses. In a GMP contract, these cost escalation clauses often set thresholds where the contractor absorbs materials cost increases up to a certain percentage, after which additional costs are shared by or shifted to the owner.”
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