Construction costs surged in Seattle during Q2, according to Mortenson Construction, with Seattle's construction cost index up 4%, compared to about 1% quarterly on average. That might not happen again, but the company does predict that costs will rise 4.5% during the next 12 months.

How can local developers cope? Mortenson chief estimator Mark Wagner tells us, "In a market like we’re experiencing now, strong trade partner relationships are vital. They keep a pulse on the market and are key [to] understanding what’s affecting material and trade costs."

Bringing trade partners onto the team early in a design assist role is critical. That way, they can "guide the design towards less costly solutions and evaluate early procurement strategies to control costs early in the project," he notes. "The more clarity and definition we can provide when requesting support from trade partners, the tighter pricing and less contingency in the prices we receive.”

Not everything is increasing in price. The Mortenson report found building materials and components in Seattle with cost increases in Q2 (as compared to Q1) included gypsum board, cast-in-place concrete, entrances/storefronts, plumbing systems, earthwork, deck formwork, carpentry/millwork, electrical systems, HVAC and unit masonry.

The highest cost increase has been for structural steel/decking. All other categories remained flat.

Labor's also in shorter supply, which drives costs up. Seattle-area construction employment slowed over the past few quarters and is now about 10 points lower than in 2015, a trend being seen in other regions of the country. "During a period of heightened construction activity, firms may be slow to scale back up in the immediate term," Mark says. "It boils down to supply and demand.”