By Roland Murphy for AZBEX
uncertain:
1. Not clearly defined or identified;
2. Today’s Arizona construction market.
On Jan. 28 and Feb. 4, near-capacity crowds once again filled the auditorium of the Arizona Heritage Center in Tempe for the BEX Construction Activity Forecast Event. As it does every year, the BEX Research staff—affectionately known as “The BEXperts”—detailed the major trends across the state in the construction markets we cover every day.
Sticking to the time-proven format, BEX Founder and President Rebekah Morris and key members of the Research team give updates on the three primary market sectors (Public Infrastructure, Housing and Private Development) we track across the 10 main markets (K-12 – Public & Charter Schools, Higher Education, Public Spaces, Transportation & Parks, Utilities, Housing, [Multifamily, Build-to-Rent], Industrial [Warehouse/Manufacturing, Data Centers], Healthcare, Hospitality, and Office & Retail).
Over the course of the year, BEX staff adds hundreds of new projects to the DATABEX project database and updates thousands more. The Forecast Event is attendees’ opportunity to see all that granular information scrubbed, collated and distilled into comprehensive overviews of the total market and activity changes in each of its subsectors over the preceding 12 months, along with our best predictions of what the coming year will hold.
State of the Market
As has become the standard for major BEX events, Morris set the stage with a market summary covering the major economic factors driving Arizona construction, with specific focus given to Population Growth, Employment, Inflation and Cost of Capital (Interest Rates) and (newly added this year) Regulation and Tariffs.
Before jumping into the hard numbers, Morris took a moment to address a concern that has been present since the pandemic but has recently seen some interesting expansion: Uncertainty, particularly in the ways social and political trends are impacting construction decisions and activity.
Her four primary points on this topic were:
- Executive Order impacts on federal infrastructure funding;
- Immigration policies that impact both the construction workforce and the design side of project development;
- Voters’ willingness to approve bonds (and the growing lack, thereof), and
- The State Legislature’s degree of willingness to fund projects other than roads & streets.
Pivoting quickly back to the core of the state of the market segment, Morris told attendees Arizona had seen a relatively consistent degree of population growth between 2017 and 2023, with each year hovering around 1.5%. 2024, however, saw an interesting drop, dipping down to 1.28%.
Total employment continues to rise, reaching a 2024 total of 3.281 million jobs, a total increase of 22.44% more than the previous peak in 2007. Construction employment at the end of 2024 was 216,100, which is still 10% less than the previous peak of 240,300 in 2006.
Also of note, Morris pointed out construction employment had trended toward growth of between 5% and 10% between 2016 and 2023 (with the obvious exception of 2020). In 2024, however, year-over-year growth was flat.
Total construction activity for 2024 was $26.4B, an increase from 2023’s $25.7B. This represents an interesting shift over time. With the exception of 2021, the YoY percent change in total construction activity between 2017 and 2023 ranged between 10% and 20% each year. For 2024, it was just 4.5%.
There is, however, a break in the data. BEX’s numbers indicate construction activity of $28.5B, an increase of 12.88%. That apparent disconnect is due to data sources. The general review is based on state tax data, which does not include manufacturing and data center developments. Once that discrepancy is taken into account, the volumes align much more closely.
When BEX first started holding its annual recaps and forecasts, sector distribution between Private, Housing and Public was relatively evenly split. Those clean wedges of the pie continue to become less and less even. Private development now makes up 52% of market activity, with Housing taking 26%, and Public making up 22%.
Again sticking to the presentation format that has proven effective in the past at presenting the “drinking from a firehose” volume of activity information in the Forecast Event, the rest of the presentation was divided between Morris’ coverage of the Public sector, Researcher Andrea Howard covering Housing, Researcher Aaliyah Koelzer presenting the Industrial information, and Database Manager Lya Parrish presenting the remainder of the Private sectors. Morris then returned to wrap up the past year and offer up our predictions for 2025-2027.
The Market Sectors
While each sector and subcategory had its own share of interesting factoids and tidbits, reporting each nuance of each segment would require a special edition of the magazine and would diminish the unique value attendees receive by coming to take in the presentation in person. For both clarity and uniformity, we will maintain the format that has proven successful in past columns and simply recap the highlights and primary data points for each sector.
K-12 and Charter Schools
- Top Project: New Build Curry Elem. & Connelly Middle School ($120M);
- Top Owner: Maricopa Unified School District;
- Top Design Firm: DLR Group;
- Top GC: CORE Construction;
- Projected 2025 Construction Volume: $498M.
Higher Education
- Top Project: UA Center for Adv. Molecular & Immunological Therapy ($290M);
- Top Owner: Arizona State University;
- Top Design Firm: SmithGroup;
- Top GC: McCarthy Building Companies;
- Projected 2025 Construction Volume: $456M.
Public Spaces
- Top Project: Sky Harbor Terminal 3, North 2 Concourse ($309M);
- Top Owner: City of Phoenix;
- Top Design Firm: DFDG;
- Top GC: CORE Construction;
- Projected 2025 Construction Volume: $1.29B.
Transportation & Parks
- Top Project: Tucson/Benson Highway (I-10) from Country Club Road and Kino Pkwy ($553.6M);
- Top Owner: ADOT (Arizona Department of Transportation);
- Top Design Firm: Jacobs;
- Top GC: Sundt Construction;
- Projected 2025 Construction Volume: $2.77B.
Utilities
- Top Project: SunZia SW Transmission Project ($1.5B);
- Top Owner: City of Phoenix;
- Top Design Firm: Quanta Services, Inc;
- Top GC: Quanta Services, Inc;
- Projected 2025 Construction Volume: $2.79B.
Multifamily (Apartments/Condos)
- Top Project: Leo Tempe ($350M);
- Top Owner: The Empire Group;
- Top Design Firm: Todd & Associates;
- Top GC: Clayco Inc.
Build-to-Rent
- Top Owner: The Empire Group;
- Top Design Firm: Felten Group;
- Top GC: Hancock Builders;
- Projected 2025 Combined Multifamily Construction Volume: $5.7B.
Industrial (Warehouse & Manufacturing)
- Top Project: TSMC ($19.5B – adjusted for equipment & machinery);
- Top Owner: TSMC;
- Top Design Firm: CTCI;
- Top GC: Okland Construction.
Data Centers
- Top Project: Stack Infrastructure PHXL2 Data Center Campus Phase I & II ($2.15B);
- Top Owner: STACK Infrastructure;
- Top Design Firm: Corgan;
- Top GC: Holder Construction;
- Combined Projected Industrial and Data Center Construction Volume: $10.46B.
Healthcare
- Top Project: Whiteriver Hospital Replacement ($500M);
- Top Owner: Banner Health;
- Top Design Firm: SmithGroup;
- Top GC: Okland Construction;
- Projected 2025 Construction Volume: $689M.
Hospitality
- Top Project: VAI Resort ($1B);
- Top Owner: Mosaic Quarter Development;
- Top Design Firm: JLG Architects;
- Top GC: Hensel Phelps;
- Projected 2025 Construction Volume: $1.24B.
Office & Retail
- Top Project: Medina Station Commercial ($150M);
- Top Owner: SimonCRE;
- Top Design Firm: RKAA Architects;
- Top GC: Whiting-Turner;
- Projected 2025 Construction Volume: $973.6M.
Conclusions
Returning to the stage after the market sector overviews, Morris thanked The BEXperts, the attendees and the event sponsors before returning to what may well be the theme for Arizona Construction in 2025: Uncertainty.
She said that while the events of 2020-2021, and the ongoing ripple effects over the years since, may have taught us to expect uncertainty, 2025 promises to be a wild ride.
Recapping the points she made in her introduction, Morris concluded with the following items to watch for:
- Tariffs and their effects on the general economy and materials availability and construction costs;
- Federal immigration policy changes and their impacts on both construction labor and design teams, many of which have a high volume of non-U.S.-born talent;
- Organized resistance to development, which has expanded from its base in resident NIMBY opposition to now include union interference, referendum drives and even opposition from competing developers;
- Power supply challenges requiring a dramatic increase in required energy delivery versus existing capacity;
- Cost of capital and funding availability, and
- Extensions to project timelines.