John Paul Perez, CEO of the affiliated group.
Courtesy of Future Proof and Triangle Blvd
According to the CEO of the Developer Related Group, building contractors have already hiked 20% of prices to offset potential tariffs.
President Donald Trump has imposed a 25% tariff on certain goods from Canada and Mexico, including steel and aluminum, and is expected to follow wider tariffs from April 2nd. Even before those broader taxes take effect, uncertainty about tariffs and inflation causes many contractors to increase real estate project costs.
Related Group CEO John Paul Perez said the contractor is increasing prices to seven projects related to the work.
“We’re seeing (the subcontractors) throw extra cushions into numbers that predict tariffs,” Perez told CNBC during a live inside wealth conversation. “It could cost as much as 20% depending on which material you’re getting from other countries.”
Perez said the price hikes are driven by forecasting higher costs rather than current levels, and it is unclear how higher costs will be split between contractors and developers.
“When you look into their numbers in detail and start negotiations, you’ll quickly see that they’re just padding to protect themselves,” he said.
As a result, tariff fear could put even more upward pricing pressure on the housing market, which has already been crippled by high prices and rising mortgage rates. A rise in construction materials prices could add $9,200 to the cost of a typical home, according to a study by the National Association of Home Builders.
The related group is one of the largest and most prominent developers in the United States, spanning affordable housing, primarily in luxury apartment buildings in South Florida. The company currently has over 90 projects at some stage of development, including rentals, affordable housing units, mixed-use developments, and luxury condominiums.
Related founder and chair Jorge Perez said that in addition to tariff concerns, the Trump administration’s crackdown on immigration could also raise the price of development as the construction industry relies heavily on foreign workers.
“It’s absolutely cost-effective in our industry, especially the construction industry,” he said. “Losing these people has an inflationary effect.”
For now, related, he says the high-end real estate market remains strong, especially in Florida. The company sold two condo penthouses for a total of $150 million in its exclusive new development on Fisher Island near South Beach in Miami.
Related to this is to build a gorgeous oceanfront condominium tower in Miami’s Bal Harbour. It is called Riverge Residence Bal Harbor, known as Bal Harbor. This offers a huge apartment in the sky.
“High-end buyers are very specific buyers,” Jorge Perez said. “These people buy apartments worth over $10 million and they are usually very wealthy. So they are not diminished in that market because they are less likely to be affected.”
Chairman Perez said those who buy “middle markets” or condominiums in the $1 million to $3 million range are taking a more on-the-scene approach, taking into account uncertainty around tariffs and immigration. Many condo buyers in Miami and South Florida are from Canada and Latin America, and are more sensitive to potential changes in immigration policies.
“South Americans are coming and saying, ‘What will happen with immigration policy?’ Or, “Are I going to lose my visa?” he said. “We had a project where we just lost seven or eight Canadian and Mexican buyers who were ready to sign a contract, and when all of this came from customs duties, they didn’t want to buy it. But I think it will settle.”
