Market Outlook
Executive Summary

With the end of 2019 just around the corner, at Sellen, we find ourselves not only looking toward 2020 but also 2021-2023. In 2020, we predict the Northwest A/E/C industry will continue to be busy at the same rate that we experienced in 2019; however, our industry may see a significant rise in development from 2021 through 2023.

This increase in activity is often both the cause and effect of several significant trends, including the continued growth in our region by tech firms and the resurgence of development in Bellevue, Kirkland and Redmond. As a result, our industry will once again face many of the same constraints and resource issues that we experienced from 2015-2017. Another trend we will focus on in this report is the evolution of the built environment and its role in recruiting and retaining talent, which will both contribute to our forecasted growth and affect the cost of future projects.

In past years, Sellen has provided a summary of costing trends for our industry, focusing on materials, subcontractor and labor costs. But it has become increasingly clear that future costs cannot be predicted through escalation alone, so we have taken this past year to dig deeper into the many complex levels of cost analysis to bring you a full market picture of the major cost drivers you can expect and should plan for in the upcoming years. We have broken these into four main sections:

Section 1: Market & Building Trends
There are seven overarching trends that we’ve been tracking over the last year. While many aren’t new to our industry, they continue to have far-reaching effects for clients developing projects. We predict these will remain true from 2020 and into the busier years of 2021-2023. They are:

  • Market exhaustion
  • Eastside growth
  • The effect of tech companies using workplaces to retain and recruit talent
  • Seattle’s role as a “gateway city” for investment sources
  • Labor cost increases
  • National interest rates
  • Global effects on Seattle’s economy

Section 2: Primary Cost Drivers
In addition to the building trends, we’ve identified five primary factors that drive the hard costs for buildings. This not only includes the expected hard costs such as materials and labor, but also other major contributing factors such as how the design of buildings has evolved over the past 10 years. The five factors we focus on are:

  • Labor and materials costs
  • Industry capacity
  • The evolution of the built environment
  • The government
  • Global factors

Section 3: Sustainability Trends
Sustainability trends – and more specifically evolving energy codes and LEED requirements – continue to be major cost drivers for buildings. The major sustainability trends to focus on in upcoming years will be:

  • Updates to LEED version 4/version 4.1
  • Materials disclosure
  • Upcoming changes to the Seattle and Washington state energy codes

Section 4: Escalation Predictions
Escalation is still a major cost driver. Here you’ll find our predictions for:

  • Material cost escalation
  • Subcontractor costs
  • Labor updates
  • Overall escalation

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