Development Hot, Construction Costs Burn
Development’s hot in Seattle, but it comes with a price — a very literal price, construction costs. How high can they go before they put a crimp in development? Find out more at the 3rd annual Seattle Construction & Development Summit at the Renaissance Seattle on Feb. 24, starting at 7:30am.
Mack Urban senior development manager TJ Lehman, who will speak at the event (right, at a previous event), tells us he expects construction costs to continue to outpace rental increases for the rest of this cycle. “I’m currently offering extra incentives to both the renters for my finished units as well as to the subs currently working on constructing them,” he says. Long-term, however, construction costs won’t top rental increases. He predicts that housing costs, especially housing that offers mobility and reinforces a resident’s identity, will increase at a greater rate than construction costs, which will track a much broader inflation basket.
Mortenson Construction chief estimator Mark Wagner tells us that larger residential projects, municipal and commercial projects will be the most impacted by rising construction costs. “The projects involving larger curtain wall and elevator systems will be most affected, since these systems are currently in short supply,” he explains. Locally, according to data compiled by Mortenson, costs were up 5% in 2014, compared with 4% nationally.
With the economic downturn in the past five years, labor and shop capacity diminished. But the demand is back and creating significant shortages in these areas, leading to large cost increases (for example, finish carpentry, roofing, decks). “Looking forward, even as the current pipeline of projects works its way through the market, we expect some of the trades will still be experiencing cost increases six months to one year from now,” Mark says, and overall increased will be in the range of 5% to 6% this year. To hear more, please join us for our 3rd annual Seattle Construction & Development Summit at the Renaissance Seattle on Feb. 24, starting at 7:30am. Sign up here!