SEATTLE

Insights:

Stronger than average wage growth, expanded employee benefit programs, and bonuses and incentives are helping to attract and retain talent. Still, the ABC projects that increased construction spending across 2024 will necessitate an “all of the above” approach to hiring in order to add the 500,000 new workers needed to meet demand. 

The possibility of interest rate cuts could improve the financing picture and help to trigger new project starts in 2024, particularly toward the second half of the year. Even as hiring continues unabated, inflation has cooled, and market watchers are expecting the U.S. Federal Reserve to cut interest rates by 1% to 1.5% over the course of the year, landing short-term interest rates at approximately 4% by December 2024, based on forecasts.

Recently named as one of Urban Land Institute’s Top 10 Markets to watch, Seattle is likely to see continued interest from project investors as financial conditions improve. Classified among other “Multitalented Producer” markets by ULI’s 2024 Emerging Trends in Real Estate report, Seattle was noted for its significant tech presence and substantial science, technology, engineering, and mathematics (STEM) employment base, as well as a diversified economy producing a wide range of goods and services. 

Mass timber continues to gain favor in the Seattle market as a low-carbon alternative construction method. In December, Mortenson topped off the Kaiser Borsari Hall at the Western Washington University campus in Bellingham. When completed, the 54,000-square-foot mass timber building will be the region's first carbon net-neutral collegiate facility.

Across the broader Q4 cost index, some material cost volatility is still evident in mechanical, electrical, and plumbing MEP scopes. Raw material futures suggest that volatility could continue for copper-dependent MEP trades: copper futures have surged along with demand for copper-rich electrification systems, prompting miners to warn that long-term supply is unlikely to keep pace with demand in the coming years

Global shipping costs for both raw materials and finished goods are likely to increase in 2024, as drought in Central America and piracy in the Red Sea complicate passage through the Panama and Suez canals, respectively. Transportation costs stateside continue to improve as oil prices drop and inventories shrink, reducing headwinds facing the trucking industry. 

Our construction cost index shows a near flattening of material, labor, and subcontractor costs for the 4th Quarter 2023 and a continued slowdown to the pace of cost increases initially triggered by the COVID-19 pandemic. Based on market data and our insights, we remain optimistic while mindful of trade-specific labor availability on a market-to-market basis. We recommend customers gauge the relative challenge of labor cost while considering project starts on an opportunistic basis for the balance of 2024.