As we head into the second half of 2025, the commercial construction and real estate markets in the Southeast—especially here in North Carolina—are defined by a mix of opportunity and challenge. High interest rates and rising material costs are creating headwinds, but robust population growth, infrastructure investment, and industrial expansion are keeping the pipeline strong.
National & Regional Trends
Across the U.S., tighter lending conditions and elevated cap rates have slowed office transactions, with vacancies hovering around 20%. Many outdated buildings are being repurposed or demolished. Yet other sectors are thriving—especially industrial, data centers, and hospitality.
Here in the Southeast, regional growth remains impressive. North Carolina is attracting new capital in advanced manufacturing, logistics, healthcare, and higher education. Markets like Raleigh, Charlotte, and Wilmington continue to see a steady influx of development activity.
Wilmington, NC: A Growth Market to Watch
The Wilmington MSA (New Hanover, Brunswick, and Pender counties) is experiencing one of the fastest population growth rates in the country, driven by in-migration from higher-cost states. The region recently topped the list of most moved-to cities in the U.S., adding new households, talent, and economic momentum.
- Job Growth: Wilmington’s unemployment rate is under 3.1%, with strong hiring in fintech, clinical research, and logistics. New projects from Amazon and Frontier Scientific Solutions are expected to bring over 1,000 jobs to the area.
- Industrial Boom: The 3.3M SF Wilmington Trade Center is well underway, and ILM Airport is adding a 500,000 SF warehouse to serve the life sciences sector.
- Retail Revitalization:: National brands like Dave & Buster’s, lululemon, and J.Crew Factory are expanding in Mayfaire and surrounding areas. Retail vacancy is extremely low.
- Office Trends: New office projects are largely build-to-suit and fully leased before completion, with adaptive reuse helping keep vacancy low.
The construction outlook is positive, but labor availability and infrastructure capacity remain concerns, especially with such high construction volumes.
Construction Costs: What’s Driving Pricing in 2025
Material pricing continues to be a key concern for developers and contractors:
- Steel: Prices have surged over 50% this year due to tariffs doubling to 50%. Supply is constrained, and early procurement is critical.
- Concrete & Cement: Costs are currently stable, but potential import-related spikes loom.
- Lumber: Pricing is down from pandemic peaks but remains 12% above 2024 levels, with possible tariff increases ahead.
- Roofing Materials: Asphalt and metal roofing prices are up 6–10% due to rising input costs.
- PME Systems: Electrical wiring and copper piping costs are up 11% year-over-year. HVAC and plumbing system costs are also rising due to component tariffs and regulatory changes.
High interest rates (7–9% for construction loans) are compounding the issue, forcing some developers to pause or re-phase projects.
Outlook for 2026: Cautious Optimism
Looking ahead, the outlook is brightening. Analysts forecast U.S. construction output to grow 4.4% in 2026, with the Southeast expected to outperform due to strong fundamentals. Interest rate cuts by the Federal Reserve are anticipated later this year, which could unlock a new wave of projects currently on hold.
In the meantime, smart planning is essential. Developers, owners, and contractors should engage early, monitor pricing, and consider strategies such as phased construction, pre-purchase of materials, and value engineering to keep projects on track.
At McKinley Building, we remain committed to helping our clients adapt to changing market dynamics and capitalize on opportunities. Whether you’re planning a ground-up industrial facility, repositioning a retail center, or preparing a tenant upfit, our team is here to help guide your project to success—on time and on budget.
