Home AEC Seattle is ‘On the Map’: Sellen Construction’s Industry Outlook for 2019

Seattle is ‘On the Map’: Sellen Construction’s Industry Outlook for 2019

California State Teachers Retirement System, Los Angeles, Resmark, ResCal Investments, San Francisco Bay Area, Seattle, CalSTRS

By Meghan Hall

Scott Redman, Sellen Construction’s CEO. Image Credit: Sellen Construction

Sellen Construction has been a staple in Seattle’s real estate industry for close to eight decades, working with some of the biggest companies in the region and watching its hometown experience a period of rapid growth and expansion. With funding reaching new heights, companies are growing faster than ever before, placing Seattle “on the map,” according to Sellen Construction’s CEO Scott Redman. While the pipeline of projects is promising over the next two to three years, said Redman, diversifying its projects and carefully thinking through its growth strategies will be pivotal in maintaining the region’s status as a major global real estate player.

Sellen Construction has been part of the Puget Sound real estate industry for some time now, since its founding in South Lake Union in 1944. In its 75 years in operation, what has changed and what has stayed the same?

In 1944, Sellen’s first projects were with Boeing in its era of post-war growth. Through the years, we have built a number of unique and iconic projects across the region. Some of our early projects included Northwest favorites like the Rainier Brewery, Magnolia Theater and the International Fountain at Seattle Center for the 1962 World’s Fair. In the 1980s, and through to the 2000s, we built a number of the region’s commercial office and healthcare campuses, including work for Microsoft, Swedish Medical Center and many others. More recently, our work has been more concentrated in the urban core where we have helped create many of the high profile, technology-focused office buildings, high-rise residential developments, research and health care institutions, and the arts and culture spaces that keep our region so vibrant. Changes in our industry are accelerating rapidly as advances in data analytics, technology tools, and the integration of design and construction are finally reaching their potential. What hasn’t changed at Sellen – and never will – is our commitment to create valuable partnerships with our clients and design partners and to invest our time and money into creating impact in our community and improving the lives of those around us.

2018 was an active year for the Puget Sound development and construction industry. How did Sellen fair this year, and what are Sellen’s expectations for 2019?

2018 was a very successful year for us, though not without its challenges. The white-hot market here in the Northwest has created stress throughout the local real estate, design and construction industry, as nearly everyone is at or beyond capacity, causing the usually predictable models for cost and schedule to get blown up a bit. I’m really proud of the way our teams have navigated what has been a turbulent time for many in our business. Looking ahead, we have a healthy backlog and good mix of project types and sizes with great clients. One area in which we’ve seen tremendous growth is our tenant improvement work. Job growth in small and large companies, who are attracted to the amazing talent in the region, has created great opportunities to grow our Special Projects team that focuses on tenant work. Last year we did close to $50 million in TI work, and this year will be closer to $90 million.  

Is there anything that concerns you about the year ahead?

Market concerns include:

  • Costs for land and construction are increasing faster than rents
  • Impact of potential tariffs
  • Signs of fatigue in the high-rise, high-end apartment market
  • The need for smart affordable housing solutions
  • An uncertain interest rate environment
  • Skilled labor availability

Conversely, do you think there will be opportunities to grow and evolve?

Market opportunities include:

  • Technology Hub: Seattle is a global technology talent center with many firms landing or expanding in the area.
  • Regional expansion: The Eastside and its expanded transportation options stemming from ST2 and future ST3. The result is new development opportunities outside of Seattle. We’re already seeing this with many tech firms expanding and/or moving to many of these future developments.
  • International focus: Seattle is also attracting more national and international real estate investment. As the city has grown from a regional to global leader, Seattle is very much “on the map” from a global real estate perspective. Staying competitive and adopting smart development strategies will be important if we want to retain that edge.

What do you think the Puget Sound construction pipeline will look like over the course of the next two to three years? Why?

Our backlog for the next two to three years is very strong, and we are still seeing many, many opportunities with both new and existing clients. Seattle is attracting industry leading technology companies in search of the local talent in cloud computing, artificial intelligence and visualization tools. Many large technology firms are planning or currently building large-scale expansions in the area. Arts and cultural institutions continue to invest in creating great audience experiences, and many of our healthcare clients are modernizing and expanding their facilities. It’s a great time to be in the PNW.

Sellen has worked on a diverse array of projects from arts and culture to healthcare, to tenant improvement and life sciences. Is there a sector that Sellen will focus on in the coming year? Why or why not?

Our healthcare, tenant improvement and office building projects will remain the largest sectors. When we think about backlog, we’re looking two to three years out. While we have deep expertise in those three markets, having a healthy mix of project types and sizes is essential to weathering the inevitable cycles. We are currently working with great local clients like Amazon, Microsoft, F5 Networks, Seattle Children’s Hospital, Swedish Medical Center, the Bill & Melinda Gates Foundation, the Museum of Flight and many, many others. We will continue to look at design-build opportunities, smaller regional projects and unique partnerships with our best clients.

Construction costs around the Puget Sound — and in many other gateway markets — are continuing to rise, while labor has become increasingly scarce. How does Sellen approach these challenges?

Collaboration and cost predictability are key in this market. By integrating design and construction teams early in the process, we can identify the greatest needs for high-quality teams from key subs and suppliers, and a procurement strategy that reduces the surprises that can kill projects. We also vigilantly monitor the cost impacts and capacity of subs and suppliers across the market. It remains a risky time in the cycle and we need to understand what’s going on with our design partners, subcontractors and clients. “No surprises” is a big deal around here.

What are some other challenges the industry faces today that may not be as apparent to those outside of the construction industry?

The general demographics of tradespeople has shifted. Many of the boomers are retiring, but we have a wealth of great young talent. We’ve operationalized learning and development to focus specifically on building leadership capacity with a younger workforce. In fact, we have one person who works directly with high-potential tradespeople to ensure they are supported in their work and have a path to leadership.

Of course, technology and innovation are always in the conversation. We work to understand the risks and rewards for each new tech tool or process, but the challenge is most often adoption. When you have a number of projects at different phases and a vast workforce, system change can be slow. To make a holistic change to the way we work, it may take many years to get through all project startups and closeouts. In the tech world, that’s a lifetime.

The construction business is competitive in Seattle — how will you differentiate your work and product from others?

We believe that being the heavyweight champ in construction cost data combined with a predictable and consistent delivery model comprised of the best builders in the business is why our clients choose us — and keep building with us. We hire and promote people with character and integrity and a desire to always be improving. Our employees are deeply connected to the mission and purpose of the buildings they have a hand in creating. We are focusing on more than just creating buildings, we’re committed to making a positive impact in our community and improving the lives of those around us. We founded the Sellen Community Foundation, created a VTO (Volunteer Time Off) program to encourage our employees to donate work hours to service for others, and have built generous employee giving and corporate philanthropy programs. Sellen is a welcoming and diverse workplace and we’re working on building relationships with underutilized and underrepresented subcontractors and partners, and supporting programs that train and connect diverse candidates to enter the trades.

What is Sellen looking forward to in 2019? What are its goals for the next 12 to 18 months?

This year is about operational excellence. With our new leadership team, we have fresh energy around best practices and consistent, predictable results. There is a palpable excitement about our upcoming projects and the opportunities for our people to take on new roles and responsibilities.