Seattle construction image for "The cost of Labor and Seattle Real Estate Investment" post on Seattle Commercial Real Estate LLC blogIn a January 2nd article in the Puget Sound Business Journal, the cost of labor and the dispute with west coast ports as well as Boeing’s decision to move to South Carolina were headlined. The interesting aspect is that the same issue of the cost of labor in the construction industry drives the replacement cost for Seattle real estate investment. Inevitably this cost flows through to the cost of replacement and drives rents in the apartment market as well as the office and retail real estate markets in Seattle and the Puget Sound region.

Impact of Major Cities Spreads through all Sectors of Real Estate

Seattle is the clear leader in what happens in real estate in Washington State. There is a clear line between Seattle and Bellevue being the center of the pond and everything goes out from there. The radius of greatest impact is within five miles and spreads out from there with clear lagging in the major metropolitan areas of Greater Tacoma and Greater Everett. There are two major geographical and political limiting factors to each of these two cities. In the case of Everett, you must overcome the Snohomish River lying east and north of the city which forces growth to Marysville and East towards Snohomish and Monroe. In the case of Tacoma, Joint Base Lewis McChord presents a huge land mass forcing growth to go east towards Puyallup or to jump towards the south to the greater Olympia area.

Apartment Rent Increases with Growing Labor Costs

In another article, Seattle Commercial Real Estate discussed the news media take on rising apartment rents in Seattle and the effect of these rents on apartment buildings for sale. There is a clear relationship between replacement costs of commercial real estate be it apartments, industrial or office space and the rise in rents. The supply of land which has zoning never increases and government’s response to growing demand is to allow more density of development. The corollary to that is that the cost of “sticks and bricks” may remain relatively the same, but labor wants “their fair share” and is constantly striving to increase wages. The net result in real estate investment is the long term increase in the cost of all real estate.