Georgia-Pacific abandons Atlanta conversion as diesel and materials costs break budgets

Diesel topped $6.50 a gallon this past week, an all-time high and nearly $3 above where it stood two years ago, according to the U.S. Energy Information Administration, which attributes the rise to the conflict in Iran. The fuel powers the equipment on a commercial jobsite and moves the materials to it, and it is one of the costs behind a run of cancelled projects around the country.

Earlier this month, Georgia-Pacific abandoned a conversion plan it announced in 2024 to turn part of its 51-story Atlanta headquarters into apartments, retail and entertainment space. Construction costs killed the project, according to Bisnow's reporting on the cancellations.

In Virginia, the owner of a major redevelopment site has proposed terminating an approved plan for more than 700 residential units plus retail, while a New York developer in August dropped a luxury residential high-rise in Philadelphia nearly four years after buying the vacant parcels and switched to a 34,000-square-foot retail building instead. The three cases vary in how far the retreat has gone: Georgia-Pacific canceled outright, the Philadelphia developer traded a residential tower for a smaller retail building, and the Virginia owner has proposed terminating an approved plan that is not yet a completed exit. Land that has already been bought and approvals already won are hard to write off, which suggests at least some of these responses will look like a retreat in scope rather than a clean exit.

Fuel is only part of the arithmetic: construction materials prices climbed 13.3% year over year, nearly five times the rate of a year earlier, according to a Cushman & Wakefield Construction Insights report released earlier this month, with aluminum up nearly 41%, copper nearly 40% and nonferrous metals 38.5%.

Steel and aluminum have faced a 50% import tariff since June 2025, and those two metals sit at the top of the price index; the more consequential Cushman finding for anyone running a project today is that materials have replaced labor as the primary driver of construction cost growth, as material prices climb and wage growth moderates. That reordering changes the character of an overrun: labor pressure tends to surface as a slipped schedule or a renegotiated scope, which a developer can sometimes absorb, while a materials-led increase shows up as a hard number on a supplier's invoice, a harder conversation to win. Read together, the index and the cancellations describe the same pressure at two scales.

Daniel Perdomo, chief executive of the electrical services provider 5 Points Electrical, described the pass-through in an interview: "It's just too much sometimes for them, and they back out of the project," he said, describing cost increases that accumulate quietly until a budget that once worked no longer does, with developers reacting only after the number is broken.

"Diesel affects the transportation of every other input," said Zack Fritz, an economist at Associated Builders and Contractors. The mechanism is what makes a fuel price more than a single line item: it sits underneath the cost of moving every material a project needs, and it has risen nearly $3 a gallon in two years.

The squeeze compounds with the cost of money, and the coverage sets the cancellations inside an economic environment defined by tariffs, higher fuel prices and elevated interest rates—a combination that leaves a developer with fewer places to absorb a surprise and more reasons to wait.

The Virginia project had an approved plan, and its owner moved to terminate it anyway, a case that sits on the other side of this publication's argument that the binding constraint on development is often the council vote rather than the construction loan, in the context of Mid-Atlantic data center entitlement. The approvals were in hand, and the project still went the wrong way.

The cancellations also share a vintage: Georgia-Pacific's conversion was announced in 2024, and the Philadelphia developer bought its parcels nearly four years before it pivoted. Budgets set in that window rest on a cost base that has since moved fastest in the categories—metals, fuel—that appear hardest to substitute away from.

Two of the three examples are residential—the Virginia plan's 700-plus units and the Philadelphia high-rise—and if they are representative, the apartment pipeline that patient capital has been underwriting is taking longer to arrive, tightening the 2028-29 supply-gap case by removing future units even as the same costs raise the basis for whoever eventually builds. Three cancellations do not establish a trend; the composition of the next batch will.

Bisnow reports that a continued increase in costs could affect some of the hundreds of billions of dollars in private commercial projects now underway in the United States, and for the capital behind those projects the live question is what a developer does at the moment a budget breaks. Philadelphia's answer—keep the land, shrink the program—is one; Virginia's, so far, is to propose walking away from an approval that took years to win.

Every pressure on that list, from the tariff to the fuel price to the metals index, sits outside a developer's control, which is why the answer has been to stop rather than reprice. The nearest test of how far that reaches is already on the table: the Virginia owner's termination is a proposal, not a completed act, and what happens to it will say whether cost alone is now enough to end a project that has already won its approvals.