CONSTRUCTION COST TRENDS
Construction
costs remain relatively flat in the third quarter of 2023. An analysis from
Mortensen Construction* found that construction costs increased 2.7% over the
last year in Seattle and 2.3% nationally. This is a welcome departure from the
double digit cost increases over the last number of years. The study shows a
cumulative 193% increase in construction cost from 2009, which coincidentally,
is the year that DADUs were first legalized throughout Seattle.
HOW MUCH DOES IT COST TO BUILD A DADU?
Not
surprisingly the average cost to build a DADU has increased in pace with these
larger trends. In addition to increases in material and labor costs the size
and complexity of DADUs have increased as well. ADU code changes meant to
encourage the construction of more ADUs, have increased the allowable size of
ADUs. Many of the DADUs built today are larger than they were in 2009. The DADU
pictured above contains 1,440 sq. ft. where a DADU with a similar program built
prior to recent code changes could have only been 800 sq. ft. in size. The
increasing sale of DADUs as condos has led to more speculative builders
entering the market. ADUs built for sale are further pushing the size and
amenities offered in DADUs which now compete with modest size single family
homes in our tight real estate market.
WHAT WILL IT COST TO BUILD A DADU IN 2024?
The
cost to build an ADU will likely decrease next year based on a number of
predicting factors. Data from the Mortensen Construction Cost Index shows that
in Seattle material costs are flat and number of people employed in
construction as roughly the same as in 2019 and 5% lower than in 2022.
Meanwhile, the number of residential building projects completed in Seattle has
increased 22% in the last year. Conversely, the number of new residential
building permit applications, an indicator of future demand for construction,
has dropped 38% in the last year. That indicates a rapid decline in future
residential construction activity in the coming year. This is happening at the
same time as commercial construction is also slowing amid rising vacancy rates
and higher borrowing costs. These trends bode well for lower material, labor
and sub contractor costs in the near future.
WHAT WILL IT COST TO BUILD YOUR DADU?
The
first questions we usually answer for people planning to build a DADU are about
feasibility, cost, and design which are all interrelated. A preliminary site
assessment, which can be done via phone or email, is the first part. At
that time, we can answer questions and we can discuss budget ranges for
recently completed DADUs.
*Mortensen Construction compiles data on
a wide range of projects throughout the country in their annual Construction Cost Index.
