• Tariffs and global uncertainty are driving up construction hard costs and disrupting material sourcing and timelines. 

• Developers and contractors are responding by rethinking supplier relationships, stockpiling inputs, and tightening contract language. 

• Legal and accounting professionals play a key role in helping you manage financial risk, secure financing, and monitor vendor compliance. 

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In today’s construction market, tariffs change fast — and so do your costs, contracts, and supply chain risks. One week, your project inputs are tariffed at 25%; the next week, that rate drops to 10%. This type of volatility is no longer the exception, it’s the new norm.

As of mid-2025, tariff policy remains in flux. While electrical components, steel, and Canadian lumber remain hot-button items, the broader concern is uncertainty.

“Uncertainty causes a hold or freeze in decision making,” said Eric Paulsen, chief operating officer of commercial real estate firm Kidder Mathews. “With the fluctuation in pricing, contractors used to provide a quote that was good for months, now it’s only good for a week … if not days.”

So, what does this mean for your bottom line — and how can you adapt your contracts, purchasing, and financial planning to respond?

How Tariffs Are Hitting You on the Developer Side

Tariffs are directly affecting hard costs and disrupting the procurement process, especially when it comes to internationally sourced materials like steel and electrical equipment. According to Paulsen, delivery delays for items like electrical transformers and panels have become more severe. Even before recent escalations, delays were stretching out to 12 months or greater — meaning materials had to be ordered before final plans were approved just to stay on schedule.

Paulsen added that uncertainty is now adding “an extra layer of scrutiny” to every purchasing decision.

Practical Steps Developers Are Taking

To mitigate the risk of tariffs, some developers are taking proactive steps, such as:

• Buying in advance or keeping materials on hand: While this can be “brutal for smaller shops,” it’s a practical move to hedge against volatility.

• Seeking out new sourcing options: Paulsen noted that smaller countries like Cambodia are trying to modernize and enter the manufacturing game, though that’s still a longer-term shift.

• Preparing to shift suppliers: “Long-time relationships between contractor and supplier are now at risk,” he said. For some firms, the current environment is “a great time to usurp a previous relationship.”

Ultimately, Paulsen warned that “development at its core has to pencil or the development won’t happen.” Unless it’s a government or public-use project or a user-driven build-to-suit, many speculative projects are currently on hold.

Best-Case Versus Worst-Case Scenario

Moving forward, Paulsen describes the best-case scenario as “stability or at least a sense that the worst is over, so people can make some decisions.” The worst-case scenario? Basically, more of the same: “Flip flopping, start/stop, or anything that causes uncertainty.”

For developers to fully participate in the market, they need to have a sense of where things stand.

“We need the rules of the road,” Paulsen said. “With some final stability, people will figure out the new market measures and re-engage. Until then people who can wait, will.”

On the Legal Side: Modernizing Your Contracts

If you haven’t revisited your contracts in the last few years, now’s the time.

Derek Weisbender, a construction partner at Allen Matkins, a law firm with deep roots in real estate, noted that it’s typical for certain contracts to allow contractors to request more money when there’s an unanticipated change in law (such as a new tariff) that makes performance more expensive. The burden is on vendors to support their claims.

He said there is an “obligation on vendors [to] show baseline costs as of the contract date.” That serves as support to validate future price fluctuations. Without that transparency, disputes are more likely. But if the backup is built in, you’re better positioned to make your case — whether costs go up or down. But what’s newer, and not often considered, is a reciprocal clause that protects an owner or developer when the opposite occurs (such as when a tariff is rescinded).

“Sophisticated owners are using the baseline tariff cost to claw back savings when tariffs are avoided,” Weisbender noted. In other words, if tariff costs are ultimately avoided, the owner or developer can negotiate a partial refund or cost adjustment. Some contractors may disagree. But, as Weisbender explained, “it seems fair that if an owner should bear the burden of a tariff increase, they should likewise enjoy the savings of a tariff decrease.”

The Role of Your Accounting and Finance Team

Adapting to volatility isn’t just a legal or operational issue. It’s a financial one, too.

If you’re considering strategies like prepayment, early ordering, or warehousing materials, you may need short-term capital — and that requires careful planning and documentation. Accountants can help you:

• Model out cash flow scenarios to support big-ticket pre-buys

• Prepare the financial reporting needed for loan applications, especially if you’re approaching lenders outside your primary bank

• Support compliance monitoring for tariff-related contract provisions, validating vendor costs and identifying irregularities

While accountants can’t give legal advice, they can offer critical support when it comes to making your financial strategy align with your contract protections.

Your Next Move: Reassess Your Risk and Recheck Your Language

Tariff policy is beyond your control. But how you plan, purchase, and protect your interests isn’t.

If you’re a developer or general contractor:

• Talk to your lawyer about updating your contracts to include cost claw-back provisions 

• Evaluate whether you need to shift suppliers or purchase materials in advance 

• Engage your accounting team to model cash flow, validate vendor inputs, and support financing conversations 

If you’re relying on old contract templates or handshakes, you could be leaving money on the table, or absorbing unnecessary risks.

In today’s market, your success depends on staying agile, informed, and well-supported.

How MGO Can Help

Our Professional Services team works closely with developers and contractors to provide financial clarity in uncertain markets. From cash flow modeling and budgeting for material pre-purchasing to preparing financial reports for lenders. We help you make confident, informed decisions. We also assist with ongoing compliance support tied to contract terms and vendor costs.

Reach out to our team today to build a financial strategy that keeps your business moving forward.

The post How to Manage Your Construction Costs in a Tariff-Turbulent Year appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• AI agents deliver efficiency across the value chain — from contract review and tenant services to construction planning and payment management, agentic AI can streamline operations, reduce errors, and cut costs.
• Your firm should implement oversight, ethical safeguards, and security protocols to responsibly adopt autonomous systems.
• If you adopt early, you gain a competitive edge, as organizations that act now to pilot agentic AI use cases will position themselves ahead of competitors still relying on traditional processes.

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Real estate and construction companies are on the precipice of a dramatic shift. Artificial intelligence (AI), particularly agentic AI, will permanently change how the industry does business, streamlining functions from back-office administration to logistics, data-heavy tasks, and more.

Unlike traditional automation, intelligent agents are purpose-built and trained to fulfill specific roles, enabling them to make decisions independently and navigate complex processes with minimal human intervention. Organizations that successfully integrate these tools stand to benefit from faster decision making, improved project planning, and more competitive pricing.

For all its benefits, autonomous AI represents an intimidating advancement. These systems require robust support infrastructure and bring new risks and challenges. Organizations will need to strengthen their data governance processes, implement cybersecurity best practices, learn how to collaborate with autonomous systems, and account for novel risks like AI bias on an ongoing basis.

These complex dynamics call for thoughtful planning and targeted investments without delay. As first steps to integration, real estate and construction companies should proactively investigate how agentic AI can improve their operations and seek out potential use cases. Organizations that act quickly will unlock a powerful competitive differentiator, while those who wait risk being left behind.

Agentic AI Real Estate and Construction Use Cases

Companies are just beginning to understand the vast potential of AI agents. For real estate and construction leaders seeking an entry point, several use cases stand out as impactful and achievable options, each carrying the potential to increase efficiency and reduce operational overhead.

Real Estate Use Cases

Contracts and pricing: Property management firms are responsible for maintaining and understanding large troves of documentation. AI can quickly sift through huge amounts of data, easing the process of reviewing and drafting key documents. These tools will help verify that contractual clauses are written correctly and do not contain any oversights. They can also monitor regulatory activity and notify businesses in real time about any changes, new rules, and potential compliance issues. With appropriate oversight, they will even be able to make the necessary adjustments in some cases. 

During negotiations, firms could call upon their AI agents to screen tenant applications and leverage historical and current market data. Property managers could come to the table confident that their pricing decisions are defensible and backed by data, tailored to both meet their needs and satisfy applicants’ expectations.

Tenant management and customer service: Intelligent systems can offer around-the-clock support for maintenance or information requests. Previously, if a tenant experienced a non-emergency issue with an appliance during the night, they might need to wait until the following day to notify their management company and schedule repairs. Autonomous agents can respond immediately, no matter the time, and place a service request on the schedule for the following morning. Prompt responses will help reassure tenants they are being heard, reducing instances of friction and building loyalty. Should an emergency arise, the system can immediately notify the management company and update the maintenance schedule accordingly.

Back-office support: AI will transform the back office, processing and validating payments automatically and sending reminders to tenants or other customers who miss a deadline. With access to this financial information, intelligent tools can also help collect and organize data for financial reporting obligations and, if given the appropriate parameters, may even supplement actions such as filing taxes, cutting down on compliance costs while increasing efficiency.

Portfolio Management: Agentic AI can act as a continuous decision-making partner in investment management for both real estate and construction firms. It can autonomously monitor market dynamics, forecast project viability, and reallocate capital across portfolios in real time. It can also evaluate factors like material cost fluctuations, urban development plans, and rental yield trends to optimize asset performance without constant human oversight.

Construction Use Cases

Coordination and planning: AI agents can engage in forecasting, simulation, and planning for construction projects. They can also oversee communications with and between parties like inspectors, contractors, and subcontractors. Acting as project managers, these systems will monitor and log progress when a job is running smoothly, and step in to help course correct when necessary, independently adjusting schedules or budget forecasts based on changing circumstances. If, for example, malfunctioning machinery causes a work stoppage, an AI agent can flag the breakdown and incorporate the time needed for repairs into an updated project roadmap. With an autonomous agent managing workflows, organizations may be better insulated against human scheduling errors and resultant cost overruns.

Payment Management: Agentic AI can help construction companies manage payment applications, ensuring contractors and subcontractors are paid on time. It can also log completed work for recordkeeping and reporting purposes, keeping information standardized and accessible and reducing the chances of documentation getting lost or misclassified.

Permits and compliance: Construction projects require proper permitting and regular inspections to verify that job-site conditions are safe and compliant. Mistakes or misstatements in permitting documentation can be expensive and may increase overall compliance costs or open organizations up to enforcement actions. Intelligent agents can reduce these risks by gathering information for use in permit applications, interpreting and filling out the necessary forms, keeping track of permits filed, and updating the company in real time if permitting needs change. This function can be particularly impactful with respect to local jurisdictions, where regulations can often vary widely and can be difficult to track manually.

Agentic AI can also monitor labor union agreements and related workforce regulations, helping firms proactively align with union requirements, avoid disputes, and maintain smooth operations across all jurisdictions.

Humans in the Loop

Real estate and construction companies can pursue these applications today. As agentic AI advances, companies can integrate these systems even more deeply into operations. Think of smart buildings and autonomous construction equipment, all managed and guided by intelligent tools.

Even as AI functionality continues to evolve, one factor remains constant: Humans are essential to support both initial integration and provide ongoing oversight of new tools and technologies. Leaders must remain aware of the challenges AI can bring and treat adoption not as a one-off instance but as part of a long-term strategy.

Agentic AI Risks and Challenges

In the past, real estate and construction companies have not been as tech-forward as other industries. To support agentic AI, they will have to make up ground, particularly in areas like governance, cybersecurity, and AI literacy.

AI Bias

The risks posed by unseen biases grow substantially with AI agents. Data used to train AI is subject to the biases of the humans who provide it, sometimes causing a program to “inherit” the discriminatory biases of its creators. Inherited biases could lead to unfair or inaccurate outputs that damage the businesses that rely on them. This risk is especially prevalent for real estate firms, which may employ intelligent tools for tasks like pricing, contract negotiations, and application screening. For instance, if those systems have inherited a bias that causes them to treat applicants differently based on a protected characteristic, the firm could violate fair housing regulations, leading to significant financial, legal, and reputational risks.

Preventing AI bias demands continuous and active testing, covering both the underlying dataset and the AI’s outputs. Companies should request bias test results from any potential AI vendor, and check whether a vendor has obtained third-party certifications such as SOC 2 as an additional layer of confidence. A lack of bias testing is a red flag. The risks of harm to a business and its customers are too great to ignore. Organizations inexperienced in making these evaluations may consider enlisting a knowledgeable third party with the resources and experience to help check for unseen biases.

Governance

Strong AI governance, covering both technical concerns and operational risks, is critical for successful AI implementation. Because autonomous agents will operate cross-functionally, building a governance framework must be a cross-functional process, incorporating feedback from each area of the business and covering critical domains like risk management, data ethics, data privacy, data lifecycle management, and organizational structure.

For real estate and construction companies, the first step is assigning decision rights. Where will an AI agent be empowered to make decisions, what data will it leverage to do so, and how will human oversight be conducted? Answering these questions means defining specific use cases, such as the options above, and will allow firms to clearly delineate the AI agent’s role and assessing any risks tied to each use case. Organizations will also need a process to document decisions and deliver feedback. For domains that introduce compliance risks, such as construction site safety or tenant application screening, governance teams should implement several layers of checks to ensure that all decisions are responsible and ethical.

Governance is not just as a means for organizations to protect themselves, but also a way to unlock the full potential of their AI agents. A clear scope and well-defined decision parameters will enable safer usage, but they also create higher quality and more reliable outputs.

Cybersecurity

Interconnected systems can increase security vulnerabilities, necessitating new protections against novel forms of data theft. Real estate and construction companies will need clear visibility into AI input data, how that data is processed, who has access to it, and how it is shared to support data loss prevention (DLP) and stop sensitive data from leaking.

For organizations that employ outward-facing AI, such as agents that handle tenant inquiries, these needs are even sharper. A user interacting with an agent could ask a question that causes the system to reveal sensitive business information. Known as “prompt injection,” this tactic is increasingly used by bad actors to steal information without breaking into a company’s systems.

In some cases, strengthening cybersecurity also involves physical security. On a construction site, for instance, supervisors will likely use mobile devices or machinery that communicate with AI agents. Firms must be sure they have adequate endpoint security and a robust mobile device management strategy to track usage. If an unauthorized individual gains access, whether on purpose or by mistake, they could obtain sensitive information. These devices should only be accessed by trusted, predesignated users.

How MGO Can Help

Adopting agentic AI is not just about technology; it’s about building a sustainable framework that blends innovation with responsibility. At MGO, we help real estate and construction firms evaluate practical AI use cases, strengthen data governance, mitigate risk, and design tailored strategies for integration. Whether you are exploring tenant management automation, portfolio optimization, or construction compliance tools, our team provides you with the insights and guidance needed to move forward with confidence. By acting today, your organization can unlock efficiency, resilience, and a powerful competitive advantage in tomorrow’s market. Contact us to learn more.

Written by Tyler Cahill, Kirstie Tiernan and Kristi Gibson. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com.

The post Agentic AI Use Cases for Today’s Real Estate and Construction Firms appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• AI adoption will accelerate across both the real estate and the construction industries, helping companies reduce costs, improve efficiency, and manage labor shortages, so if you’re lagging behind, you’ll want to catch up quickly.
• New regulations around biometric data are expected to emerge, especially at the state level, so construction companies will need to proactively safeguard their employee information.
• High-impact projects like data centers, infrastructure builds, and adaptive reuse conversions are expected to drive demand throughout 2025, with smaller commercial developments taking a backseat.

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Across industries, the last year has been challenging for U.S. companies. Uncertainty around the election, steep inflation, and high interest rates have introduced instability and financial pressures that have taken their toll on the business landscape.

As 2025 nears, things appear to be changing: Interest rate cuts are on the horizon, while the end of the election cycle may introduce greater market stability heading into the new year.

Forecasted market stability doesn’t mean the new year will be without its challenges. A new administration and shifting market pressures mean real estate and construction leaders must act now to take advantage of new opportunities and confront persistent obstacles.

Looking for the right information to prepare yourself for the year ahead? Read on to uncover our predictions for real estate and construction in 2025.

Prediction 1: AI use will drastically increase in real estate and construction

AI use has become widespread in the business community, but not every industry is using it equally. While many real estate firms have started adopting AI, the construction industry is largely still in the exploratory stage.

We expect to see both industries drastically increase their use of AI in the next year, driven by the accessibility of generative AI and the opportunity for substantial cost savings, especially as companies seek to combat inflation. AI can also be used to improve safety, streamline project management, and address labor shortages. Already we’ve seen the benefits a company may achieve by leveraging AI. Now is an ideal time for slower adopters, like the construction industry, to make their move.

While both the construction and real estate industries will increase AI usage in the next year, the paths taken may be different. Construction companies will likely prioritize applying AI to project management areas, such as monitoring budget spend, scheduling tasks, suggesting resource allocations, and flagging unexpected delays. Real estate firms, meanwhile, may see the greatest immediate benefit by using AI to streamline communication. For example, using chatbots to answer renters’ simple questions and route more complex questions to appropriate professionals can lower costs while saving time and effort.

Prediction 2: More legislation will be introduced to protect biometric data

As AI makes it easier to collect and analyze biometric data, more construction companies will likely adopt AI to apply to their own biometrics use cases, such an enhancing security and tracking time. At the same time, we expect to see the introduction of more legislation governing how employers use, manage, store, and protect biometric data.

Biometric Data: Unique physical or behavioral characteristics that can be used to verify a person’s identity, such as fingerprints.

Biometric data has serious privacy implications and employees may have concerns around how their private information is being used, stored, and protected. If a construction company experiences a data breach, for example, employees could have their biometric data stolen, putting them at risk of identity theft.

Legislation like this already exists in some states — most notably Illinois — and more state-level regulations will likely pass before federal regulations are enacted. Construction companies should monitor the evolution of biometric regulation in their state and take proactive measures to secure their employees’ data.

Prediction 3: Data center construction will be robust

As tech companies ramp up investment in AI tools, they will need increasingly powerful data centers to support them.

Many tech companies are seeking construction bids to build new centers with the required infrastructure to power and maintain AI tools, instead of retrofitting existing buildings that may not have the appropriate features. For example, data centers that power AI tools generally need more advanced cooling systems than data centers that support technology requiring less computing power, such as cloud computing.

New data centers will likely be built in areas with abundant open space and proximity to key resources, such as power transmission infrastructure and access to labor. Northern Virginia; Austin, Texas; Atlanta, Georgia; and Columbus, Ohio are just a few examples of locations tech companies are eyeing for possible data centers.

Tech companies will face a major challenge in supplying the considerable energy needed to power each facility, as some AI tools require energy that may exceed the capacity of nearby power grids. One possible solution tech companies are exploring is nuclear energy, but they face considerable legal challenges they face in obtaining access to compact nuclear reactors.

Ultimately, as AI use becomes more widespread, the infrastructure needed to support these data centers will also need to increase drastically, which may mean even more construction projects in the near future.

Prediction 4: Commercial real estate will continue to transition to residential living

Commercial real estate faces ongoing challenges as remote work continues and commercial mortgage- backed securities become due. However, industry trends are helping to address obstacles in new ways.

Adaptive reuse — the repurposing of existing buildings — offers opportunities for new residential spaces by retrofitting abandoned malls, schools, office buildings, and more.

In 2025, we expect to see adaptive reuse accelerate, as fewer workers return to the office and the housing crisis continues. Currently, the U.S. has a shortage of 7.3 million rental homes that are affordable and available to renters with extremely low incomes. Adaptive reuse can play a major role in addressing this crisis, especially in urban areas, which tend to see greater housing scarcity.

7.3 Million: Shortage of affordable and available rental homes

Surrounding businesses, many of which are struggling in the era of remote work, can also benefit from adaptive reuse. Without workers coming into the office every day, many coffee shops, restaurants, convenience stores, and other service providers have taken a hit to their bottom line. By bringing more residents into the community, these businesses could see a boost in sales to offset the impacts of remote work.

Prediction 5: Infrastructure and industrial projects will increase

In 2025, we expect construction companies to continue taking on large numbers of infrastructure and industrial projects. Infrastructure projects will see increased investment in part due to the increased frequency and severity of natural disasters, which will require the U.S. to both build new and repair existing infrastructure.

America First policies coming out of the new Trump Administration are likely to bolster domestic industrial projects. Such policies could include expanding R&D tax credits or making permanent certain provisions of the Tax Cuts and Jobs Act that are particularly advantageous to manufacturers. Increased demand for data centers will also feed into the need for more industrial projects.

On the other hand, construction companies will likely see fewer projects from smaller retailers and non-Class A commercial real estate firms. Smaller retailers are experiencing financial pressures, such as pullbacks in consumer spending, that are likely to continue until inflation eases. We expect these pressures to push smaller retailers away from large cap-ex projects in the year ahead.

Class A commercial real estate will likely continue to see high demand. Smaller commercial real estate firms, however, have fewer resources and aren’t as well-positioned to continue investing in construction projects. They are also unlikely to beat out their Class A competitors for large project bids.
Prepare your company for success in 2025.

Written by Kristi Gibson, Brent Horak and Heath Winsheimer. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com

How MGO Can Help

At MGO, we are well-versed in the complex and evolving challenges currently facing real estate and construction companies. Whether you’re looking to evaluate or adopt AI tools, navigate biometric data regulations, pursue adaptive reuse opportunities, or prepare for the anticipated surge in infrastructure and industrial projects, our team offers the experience and strategic guidance to help you move forward confidently.

We partner with companies at every stage — from navigating regulatory complexity to uncovering new avenues for growth — preparing you to be positioned for resilience and success in 2025 and beyond. Contact us to learn more.

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