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Pending Tariffs and a Guide to Navigating Uncertainty Around Construction Costs in Healthcare Real Estate
by Jonathan Nelson, Senior Vice President, Development & Asset Management

2010 – 2020 was marked by relative stability and predictability in construction cost markets which lulled many of us into thinking that we may have entered a perpetual low-interest, low-inflation environment. Then, in just the matter of months in mid to late-2020, unexpected cost escalations and supply chain issues added to the chaos of the COVID pandemic. On the construction cost front, 2023 and 2024 saw a return to a more stable environment, moving away from the volatility of the previous two years. Enter the word “tariff” in 2025 and many industry professionals who worked through the pandemic may begin to feel their pulse rise and stomach knot.

While tariffs have long been part of global trade, changes in such can be hard to predict and challenging to factor into conceptual budgets or project underwriting. The threat or reality of rising construction costs can make any healthcare leader pause, but delaying projects often leads to even greater expenses down the road. At Anchor Health Properties, we’ve seen market cycles come and go, and through it all, our steady, disciplined approach has kept projects moving forward with confidence. We understand that economic uncertainty can create hesitation, but history has proven that well-planned, well-located healthcare developments remain essential investments and provide long-term value to health systems and the communities they serve.

The reality? Construction costs have historically risen between 2% to 5% per year (depending on asset class and geographic region). A $50 million project today could cost over $55-60 million in just five years, making delays an increasingly expensive decision. A well-structured business plan remains the best safeguard, ensuring that projects remain viable even in fluctuating markets. Waiting for costs to stabilize rarely leads to savings; instead, proactive planning, thoughtful budgeting, and disciplined execution are the keys to maintaining stability and controlling costs.

“A WELL-STRUCTURED BUSINESS PLAN REMAINS THE BEST SAFEGUARD, ENSURING THAT PROJECTS REMAIN VIABLE EVEN IN FLUCTUATING MARKETS.”

The question for health systems and providers isn’t if they should move forward—it’s how. Are we developing the right facility, in the right location, with the right mix of services? If the fundamentals are sound, the next step is ensuring financial stability by carefully aligning project scope, securing competitive pricing, and leveraging strong industry relationships to mitigate cost exposure.

And while material prices can surge—sometimes up to a 25% increase in certain hard costs—the overall impact on the total project budget is often far less significant. This is because hard costs make up only a portion of the budget, with soft costs, financing, and contingencies helping to balance out these fluctuations. The key is knowing where to spend, where to save, and how to structure a financially viable project that meets long-term operational needs.

At Anchor, we are proud to lend our experience and grit to truly “anchor” a project through challenging markets or cost environments. We know how important it is for health systems and providers to have an experienced partner by their side when developing healthcare facilities. Our team works closely with our clients to make sure the final project meets the needs of the community and supports key services while solving for a specific project budget. Through strategic cost control and thoughtful project execution, we provide the hands-on guidance healthcare leaders need to deliver a dynamic facility that aligns clinical goals with financial and operational success – allowing them to focus on what matters most – providing exceptional care.