Costs Putting The Squeeze On Seattle Developers
A boom's a great thing, but with it come higher costs—a challenge that's on the minds of Seattle developers and construction companies. Come hear more about it at our Seattle Construction & Development event at the Four Seasons Seattle on May 26.
"The biggest challenges facing developers right now is the rising cost of land and labor," Parkview Financial CEO Paul Rahimian, who will be a speaker, tells us. He adds material costs haven't escalated much—a lucky break for the industry—but the price to purchase a development parcel has increased substantially in the past 24 months, almost to a level at which it doesn't make economic sense to pursue it.
"Developers are optimistic by nature and try to pencil in higher market rents, but they're getting dangerously close to the level where the numbers just don't add up," Paul says. "Construction costs, due to labor shortages, are also affecting the pro formas.
Continental Properties president Claudio Guincher, who also will be a speaker, agrees the biggest challenges facing multifamily developers in Seattle are rising construction costs and a shortage of good sites. On top of that, he adds a shortage of experienced talent, increased governmental housing fees and increased requirements for equity and recourse from banks.
"Given the above, I think we as developers will have to work harder for lower returns in the next few years, which may result in me actually losing some of my hair," Claudio says.
Above is The Kirkland Main Street Apartments at the corner of Park Lane and 3rd in Kirkland, which Continental is planning. It will include 128 units and is slated for completion in winter 2018.
Find out more about what's going on in Seattle's development and construction businesses at our Seattle Construction & Development event at the Four Seasons Seattle, beginning at 7:30am May 26. Sign up here.