Autumn 2024 Update
Industry Trends Report
Randy Boettcher
Sr. Director of Preconstruction and Estimating
As we near the end of 2024, the local construction market remains soft, though lower interest rates may spark market recovery in 2025.
After a few years of volatile conditions, 2024 was a relatively quiet, lower volume period in the Puget Sound construction market. High interest rates have continued to stifle construction in the region, with several market sectors experiencing slowdowns. Contractors and subcontractors in the region are locked in fierce competition for the limited opportunities in the current market — many of which are publicly-funded.
It’s not all doom and gloom, however. As overall inflation has cooled, construction escalation rates have followed, leading to stable price points for many construction materials compared to recent years. The prospect of further reductions to interest rates could lead to broader construction market recovery in 2025 and beyond as developers revive projects currently on hold.
Our Autumn 2024 Industry Trends Report includes:
A breakdown of our projected cost escalation over the next few years and a look at the elements we consider when calculating our projections.
Previewing projected material cost increases in 2025 based on input from our trusted subcontractor partners.
A summary of the approximate total package increases for local unions and a look ahead to expiring contracts in 2025.
Poll results from our annual outreach to clients, subcontractors, and design partners on the state of the market.
A summary of market conditions across key project types in the Puget Sound.
What we’re hearing from our subcontractor partners as the long-projected labor shortage begins to impact our industry.
An early look at how local firms are (or are not) using emerging AI tools in their daily work.
I hope you find our report to be an interesting, timely look at the Pacific Northwest construction market. As always, I welcome any questions that you may have about our report and the trends we are seeing across the market.
Cheers,
Randy
Featured Updates
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Sellen's latest construction cost escalation projections and a breakdown of how labor, materials, and other factors combine to influence escalation.
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We surveyed the local subcontractor market to better understand pricing trends for a variety of common construction materials.
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More than 15 labor contacts were up for renegotiation in 2024. Our team summarized the outcome of those negotiations.
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We asked people in the industry to share what they are experiencing in the Puget Sound construction market. Our report summarizes the key findings from the poll.
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Advanced modeling tools and artificial intelligence have arrived in the construction industry. We asked our respondents to share how they are using these tools in their daily work and how that may change in the future.
Construction Cost Escalation
Puget Sound Market | Labor, Materials, and Fees
Methodology
Breaking Down Cost Escalation
Labor: Most major trade contracts expired on May 31, 2024. New contracts across all trades consistently include 4-6% annual wage rate increases. With some variation between scopes, labor is typically 35-45% of commercial construction costs. This 4-6% increase to 35-45% of project costs results in total escalation range attributed to labor of 1.2-2.4%.
Materials: Sellen maintains constant contact with the subcontractor and material supply community regarding projected material price changes. Materials are generally forecast to increase 3-5% through 2025 across all trades. With some variation between scopes, material costs typically account for 40%-45% of project costs. This 3-5% increase to 40-45% of project costs results in total escalation range attributed to material of 1.2% - 2.25%.
Subcontractor Fees: Current market conditions have resulted in historically low contractor fees. As the market recovers, contractor fees are anticipated to increase 2-4% as they return to historical norms. With some variation between projects, typically 70-90% of construction is performed by subcontractors. This 2-4% increase to 70-90% of project costs results in total escalation range attributed to subcontractor fees of 1.4 – 3.6%.
Escalation Factors to Monitor in 2025
Supply chains and price stability continue to be at risk of disruption by natural disasters.
Hurricanes, increased wildfire activity, and disasters such as the Baltimore bridge collapse present unpredictable volatility to the above escalation forecasts.The 2024 presidential election outcome and the resulting changes to tariffs and the Buy American Act may impact escalation predictions.
Material Costs
2025 Projections
We maintain constant communication with local subcontractors and suppliers.
Below are current material price trends.
Increasing Costs
Concrete
+ 7% to 9%
Glazing Systems
+ 1% to 3%
Elevators
+ 6% to 7%
Insulation
+ 6% to 8%
Lighting
+ 5% to 10%
Switchgear
+ 5% to 10%
Generators
+ 4% to 6%
Stable Costs
Timber
Stable Pricing
Aluminum
Stable Pricing
Steel
Stable Pricing
Labor Updates
Labor contracts for many local unions were renegotiated in the first half of 2024. Ratified wage rate increases are summarized below.
Annual increases are approximate and based on available data.
Carpenters
2025: +3.3%
2026: +5.4%
Cement Masons
2025: +5.8%
2026: +5.8%
Laborers
2025: +5.5%
2026: +5.5%
Operators
2025: +5.0%
2026: +4.9%
Ironworkers
2025: +5.6%
2026: +4.5%
Plumbers
2025: +6%
2026: +5.7%
Electricians
2025: +4.7%
2026: +4.4%
Sheetmetal
2025: +8.3%
2026: +6.2%
Expiring Contracts in 2025:
Communication Worker (non-NECA)
Drywall Finishers
Elevator Workers
Glaziers
Plasterers and Fireproofers
Sprinkler Fitters
Sand and Gravel Operators - Concrete Suppliers
Sand and Gravel Teamsters - Concrete Suppliers
Poll: Market Conditions
Each year, we send a poll to a group of clients, architects, and subcontractors with a set of questions about market conditions and trends. Ahead, we have included data and quotes from our 2024 Industry Trends poll, including a comparison to 2023 results to illustrate how the market is shifting.
Current Project Volume
Key Takeaways: Each year, we ask poll respondents to share how their current project volume stacks up to a “typical” year. The chart above shows a slight downtick in volume, with an additional 9% of respondents indicating 2024 was a below average volume year for their firm when compared to 2023. These conditions are consistent with what Sellen has experienced in 2024.
What We Heard:
Quotes from Poll Respondents
“There’s a reluctance by many of our clients to accept the new paradigm regarding the cost of construction. Waiting for costs to significantly decrease seems to be wishful thinking.”
— Anonymous Architect
“There has been some support from the City of Seattle to help ease conversions of office buildings to other uses, but the Pacific Northwest is becoming less business friendly, not more.”
— Anonymous Owner
“Healthcare opportunities have been either mega-projects ($1B+) or relatively small outpatient facilities. The majority of opportunities that we are seeing appear to be outside of what is usually considered the Puget Sound region.”
— Anonymous Architect
Poll: Market Sector Trends
We asked our architect respondents to share which market sectors were seeing the most activity. The chart below reflects data collected in 2023 and 2024, showing a precipitous drop in the volume of life science projects and a large influx of publicly funded education and infrastructure projects.
Architects: Which market sectors are seeing the most activity?
Market Trends & Takeaways
Erin Hobson, Executive Vice President - Market Strategy and Business Development
Commercial Office: According to the latest data from Cushman and Wakefield, office vacancy rates in Seattle’s Central Business District are hovering around 32%. On the Eastside, Bellevue’s overall vacancy rate is approximately 11%. Several new buildings in Bellevue have filled up quickly, and we are seeing an uptick in early interest from developers seeking to be first-to-market.
Healthcare: Many large healthcare institutions are in the midst of long-term master planning efforts. As local healthcare organizations continue to return to profitability, smaller projects are moving forward slowly. We expect to see larger healthcare projects gain momentum in the years ahead.
Life Science: The life science market has cooled significantly compared to the last several years. The actions of leading local life science organizations continue to serve as a bellwether for the broader market. Fred Hutch recently canceled plans to build a new ground-up facility, opting instead to acquire existing facilities from Alexandria Real Estate. Developer interest in this project type persists, but tenants are increasingly hard to come by.
Multifamily Residential: The multifamily residential market remains cool with relatively few projects on the horizon in the Puget Sound region.
Public Education & Higher Education: Publicly funded education projects have historically been counter-cyclical — they tend to pick up when the broader construction market cools down. This cycle is no exception, and we are seeing a tremendous amount of activity in this space. These projects are hotly contested across the market given the surety of funding and construction that comes with public backing.
Arts and Culture: Increasing labor costs and inflation have created challenging conditions for many local arts and culture institutions. Funding continues to trickle in from public and private sources, but many of these organizations are being forced to reassess their current structure to ensure their continued survival in tenuous conditions. Much of the work that is happening is focused on making existing spaces more accessible for those with limited mobility and sensory needs.
“Public sector work has seen an uptick with the continued difficulty in securing funding for commercial development...Some remnants of the hot life science market from 2021/2022 persist, but it seems to have saturated very quickly.”
“There’s increased competition in higher education, K-12, and civic work. We are seeing more modernization projects rather than new construction.”
“There are some repositioning opportunities in the workplace sector, but the overall demand for design services is lower. The cost of money is limiting opportunities in new life science investments and expansion.”
Poll: Construction’s Labor Shortage
National workforce trends have long forecast a looming shortage of skilled craftspeople in the construction industry. We asked our subcontractor respondents to share their experience with the current labor market and whether or not the predictions of labor shortages were coming to fruition. More than half of our respondents indicated that they were feeling significant strain on the talent pipeline as a generation of craftspeople retire.
“For every seven workers that retire, two take their place.”
“We literally cannot find skilled structural steel fitters, so we do all training from within. We get a large amount of candidates from trade schools, but it’s rare that they can come in and do the job.”
“Apprentices are harder to find, they don’t stay to complete training, and are usually older.”
“The younger workforce struggles to stay engaged with the grueling physical expectations of tying rebar...There are new apprentices coming in, but not at the same rate as they are leaving the industry or retiring.”
“Our union has done a good job of consistently bringing in new apprentices, regardless of work outlook. However, there is a huge talent pool leaving the industry, and they will be hard to replace.”
Supporting the Next Generation of Builders:
Sellen and many of our peers in the region are working to improve access to family-wage construction careers in the Puget Sound region. This includes our ongoing support for ANEW, a local pre-apprenticeship nonprofit dedicated to providing hands-on training at no cost to its students as they prepare to join local trade unions.
Sellen leads an annual fundraising campaign with the local subcontractor community on ANEW’s behalf. Over the last several years, this campaign has generated nearly $500,000 for ANEW’s students and staff. Read more about our work with ANEW and our ongoing support for other local organizations working to build new pathways into our industry in the Fall 2023 edition of Craft magazine.
What’s Next: Emerging Technology and Artificial Intelligence
We asked our respondents to share how their firms were — or were not — leveraging emerging artificial intelligence tools. Nearly two-thirds of our poll respondents were either actively using AI in their daily work or in an exploratory phase to determine how their firm could make use of these tools.
Key Takeaways & Sellen’s Approach to AI
Even the most sophisticated AI models on the market require accurate, robust data sets as a foundation. This critical first step is what Sellen’s team is focused on today as the preconstruction team works with our in-house technology experts to forge a clear path forward.
In the years ahead, our plan is to make decades of detailed cost and schedule data easier and quicker to access for our preconstruction team. Equipped with that data, we can leverage powerful models — potentially including AI tools — to provide our clients with greater cost and schedule certainty earlier in the process than ever before.
Stay tuned for more on Sellen’s data strategy and our aspirations for AI in the construction industry in our upcoming issue of Craft magazine.
“AI is the single biggest technology we’ve seen in our lifetimes. It will change everything....I’ve seen what Revit is doing with uploading old paper documents and creating the 3D model. I’ve used it to help solve sustainability challenges. It’s big and will continue to be for quite some time. ”
“We are using AI to expedite contract reviews and perform market and feasibility analysis.”
“We’re using it for simple framing takeoffs. We also hired an in-house AI specialist to help us simplify processes and crunch years of data.”
“We’re not using it and do not want to. We need to keep our staff engaged in learning and using that knowledge.”
“At this point, it seems best utilized to rapidly generate conceptual design options, but it seems there is a ways to go yet before it has significant impact on project-specific, detailed design and documentation.”