What's Hot

    383-Unit Multifamily Project Recommended by Goodyear P&Z

    August 22, 2025

    Aviation Training Center Planned for Mesa-Gateway Airport

    August 22, 2025

    Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades

    August 22, 2025
    Facebook Twitter Instagram
    AZBEX
    NEWS TICKER
    • [August 22, 2025] - 383-Unit Multifamily Project Recommended by Goodyear P&Z
    • [August 22, 2025] - Aviation Training Center Planned for Mesa-Gateway Airport
    • [August 22, 2025] - Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades
    • [August 22, 2025] - Rezoning Recommended for 236KSF Mesa Industrial Plan
    • [August 22, 2025] - Arizona Projects 08-22-25
    • [August 20, 2025] - Old Town Scottsdale to See $40M in Improvements
    • [August 19, 2025] - Ariz. Construction Lost 400 Jobs in July
    • [August 19, 2025] - Astra Construction Delayed Due to Financing
    Facebook Twitter YouTube LinkedIn
    • Home
    • News
      1. View Latest
      2. Planning & Development
      3. Local News
      4. Classifieds
      5. Editorial Analysis
      6. Budgets & Funding
      7. Commercial Real Estate
      8. People on the Move
      9. Arizona Projects
      10. Legislation & Regulations
      11. Trends

      383-Unit Multifamily Project Recommended by Goodyear P&Z

      August 22, 2025

      Aviation Training Center Planned for Mesa-Gateway Airport

      August 22, 2025

      Rezoning Recommended for 236KSF Mesa Industrial Plan

      August 22, 2025

      Astra Construction Delayed Due to Financing

      August 19, 2025

      Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades

      August 22, 2025

      Old Town Scottsdale to See $40M in Improvements

      August 20, 2025

      Ariz. Construction Lost 400 Jobs in July

      August 19, 2025

      Experts Share on the Latest Industrial Trends at BEX Panel

      August 15, 2025

      Scottsdale Hospitals War May Heat Up with New Banner Request

      July 29, 2025

      Glendale Voters to Determine VAI Resort’s Fate

      May 16, 2025

      Legislation Would Effectively Strip NIMBYs of Referendum Tool

      February 11, 2025

      2025 Forecast Tries to Clarify an Uncertain Market

      February 7, 2025

      RTA Funding Proposal Stirs Controversy

      August 15, 2025

      Ariz. LIHTC to Sunset Under New Budget

      July 8, 2025

      State Government Shutdown Averted as Hobbs Signs Budget

      July 1, 2025

      Arterial Life Cycle Program Covers 20 Years of Street Development

      June 27, 2025

      Commercial Real Estate 08-19-25

      August 19, 2025

      Commercial Real Estate 08-12-25

      August 12, 2025

      Commercial Real Estate 08-05-25

      August 5, 2025

      Commercial Real Estate 07-29-25

      July 29, 2025

      Industry Professionals 08-19-25

      August 19, 2025

      Industry Professionals 08-12-25

      August 12, 2025

      Industry Professionals 08-05-25

      August 5, 2025

      Industry Professionals 07-29-25

      July 29, 2025

      Arizona Projects 08-22-25

      August 22, 2025

      Arizona Projects 08-15-25

      August 15, 2025

      Arizona Projects 08-08-25

      August 8, 2025

      Arizona Projects 08-01-25

      August 1, 2025

      Tucson City Council Likely to Approve Water Restriction on Large

      August 19, 2025

      Ritz-Carlton Paradise Valley Fight Could End in Foreclosure

      August 15, 2025

      Ariz. Supreme Court Upholds Citizens’ Right to Halt Local Projects

      August 8, 2025

      Proposed Legislation Aims to Increase Housing Supply

      August 5, 2025

      Ariz. Construction Lost 400 Jobs in July

      August 19, 2025

      Experts Share on the Latest Industrial Trends at BEX Panel

      August 15, 2025

      Multifamily Developer Confidence Up in Q2

      August 12, 2025

      Ariz. Construction Gained 600 Jobs in June

      July 22, 2025

      383-Unit Multifamily Project Recommended by Goodyear P&Z

      August 22, 2025

      Aviation Training Center Planned for Mesa-Gateway Airport

      August 22, 2025

      Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades

      August 22, 2025

      Rezoning Recommended for 236KSF Mesa Industrial Plan

      August 22, 2025
    • AZBEX
      • Subscribe
      • Classifieds
      • Advertising
    • DATABEX
      • DATABEX Log-In
      • Webinars
      • Monthly Snapshot
    • Events
      • 2025 Hospitality LMS
      • 2025 Public Works Conference
    • About Us
      • Meet the Company
      • Meet the Sales Team
      • Meet the Editorial Team
      • Meet the BEXperts
    • CIP Special Report
    AZBEX
    Home » Trends » Statewide Construction Activity Continues Expansion
    Trends

    Statewide Construction Activity Continues Expansion

    BEX StaffBy BEX StaffMarch 30, 2021No Comments5 Mins Read
    Credit: BEX
    Share
    Facebook Twitter LinkedIn Pinterest Email

    No end in sight to rising construction prices

    Last year ended on a high note for construction in Arizona, with a whopping 19.06 percent increase year-over-year (YOY) compared to 2019 statewide construction volume. Annual activity topped $17.7B according to the Arizona Department of Revenue’s tax data. 2020 marks the highest annual construction volume since 2008 when the market started to slip into the Great Recession. Since 2017 the market has seen yearly double-digit increases in activity.

    Driving the market are economic forces of in-migration and demand for housing and industrial spaces. The market is delivering these in-demand products as fast as they can, but constraints of high construction prices combined with shortages of skilled labor and construction materials are having a real impact on the market’s ability to deliver projects on time and on budget. “I have not seen conditions like we are at now in the 31 years I’ve been in the market” stated Anthony Jeffers, Project Development Director of Hensel Phelps. Jeffers attributes the strong market conditions to years of efforts by economic development agencies such as GPEC and the ACA, along with business-friendly tax policies put in place by Governor Ducey and the State of Arizona.

    Industrial Leads the Pack

    Last week’s announcement of Intel’s $20B capital investment into two new fabrication facilities in Chandler comes on the heels of TSMC’s $12B capital investment into a new gigafab manufacturing plant in North Phoenix in May of 2020. These recent announcements join a long list of manufacturing facilities being built in Arizona such as Lucid and Nikola in Pinal County. While the construction costs do not make up the entire capital investment, even using a rough estimate of around 30-50 percent, these each will bring $B in construction activity to the state in the coming years.

    In addition to the heavier industrial-type construction these manufacturing facilities represent, light industrial demand is exceptionally strong as well. Warehouses, distribution centers and smaller/lighter manufacturing facilities are all surging in demand. According to the latest CBRE vacancy report, all industrial is hovering at 6 percent while space under construction is topping 11.1MSF. Compare that to a retail vacancy of 7.8 percent with 571KSF under construction and office vacancy at 17.4 percent and 2.3MSF under construction. Conclusion – retail and office combined equals roughly 25 percent of the current industrial activity and volume.

    Housing Not to be Outdone

    All the forces driving housing construction – low inventory and mortgage interest rates combined with high population in-migration – have been well documented. Arizona multifamily construction has been on a tear since 2014 even leading some to speculate that there was a “bubble” of multifamily in 2016 and 2017. Those fears have given way to a sustained bullish outlook on all forms of housing. As presented in the annual Construction Activity Forecast event in January 2021, housing (both single-family and multifamily) makes up one-third of the Arizona construction market. Multifamily construction is at an all-time high in Arizona.

    According to the U.S. Census Bureau, Arizona clocks in at number five in the nation for new housing permits since January of 2020 (data available through February 2021). Ahead of Arizona are fast-growing and/or states with very large population centers: Texas, California, Florida and North Carolina.

    Construction Prices are Increasing Fast

    With sharp increases in demand for housing and industrial spaces, prices for construction materials have skyrocketed. Lumber has increased anywhere from 60-100 percent YOY depending on the specific item and source of the material. Concrete has increased between 5-10 percent in the last six months according to Derek Wright, President of Suntec Concrete.

    BEX researchers are starting to see individual projects that no longer pencil and are being delayed or canceled outright. The biggest consideration for these projects is the time delay of when a project was budgeted to the time it goes to contract. For example, with HUD financing, the project budget is set but then goes through a 60-day review process prior to the project moving forward. That 60-day delay is wreaking havoc on subcontractor pricing.

    Subcontractors and vendors are holding their bid prices for only 7-14 days, which is putting enormous pressure on general contractors to buyout jobs early and fast in order to lock in pricing.

    Several general contractors we spoke to stated that their best advice is to secure subcontractors early, but on the other hand, projects may have to go back to the drawing board and be completely redesigned to avoid a structural design that no longer makes sense due to the sharp materials price escalation.

    Volatility in the Market Projected to Continue

    For very large projects, institutional owners and developers, GC’s and subcontractors are (ever so) slightly insulated from major volatility in the market.

    In general, the biggest projects draw the most interest from the market and will realize significant economies of scale. Negotiating a very large deal influences manufacturers so they become willing to lock in a lower unit price. Larger contractors and trade partners are able to sustain a higher pay scale for workers, in turn attracting the workforce they require for their large projects.

    Owners such as TSMC and Intel are much less price conscious than a small developer and will happily pay a premium to secure the quality and schedule they demand for their project. In addition, larger firms typically have access to capital and will be able to secure favorable purchase deals as needed to execute the projects. These factors – availability to purchase early, negotiate better purchase agreements, pay higher wages, cashflow, etc. are not available to anyone but the largest and best capitalized players in the market.

    The old adage of ‘Rising Tide Lifts All Boats’ may apply to the overall market, but it is possible we will see the lower end of the market struggle as these mega projects attract significant portions of the labor and materials in the market, continuing to drive construction prices higher than many projects can support.

    ACA Arizona Department of Revenue Construction costs GPEC Hensel Phelps Intel labor Materials Suntec Concrete TSMC U.S. Census Bureau
    Share. Facebook Twitter Pinterest LinkedIn WhatsApp Reddit Tumblr Email

    Related Posts

    Ariz. Construction Lost 400 Jobs in July

    August 19, 2025

    Tucson City Council Likely to Approve Water Restriction on Large

    August 19, 2025

    Experts Share on the Latest Industrial Trends at BEX Panel

    August 15, 2025

    Leave A Reply Cancel Reply

    You must be logged in to post a comment.

    Our Picks

    383-Unit Multifamily Project Recommended by Goodyear P&Z

    August 22, 2025

    Aviation Training Center Planned for Mesa-Gateway Airport

    August 22, 2025

    Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades

    August 22, 2025

    Rezoning Recommended for 236KSF Mesa Industrial Plan

    August 22, 2025
    Stay In Touch
    • Facebook
    • Twitter
    • LinkedIn
    • YouTube
    Don't Miss
    Planning & Development

    383-Unit Multifamily Project Recommended by Goodyear P&Z

    August 22, 20250

    By Roland Murphy for AZBEX The Goodyear Planning and Zoning Commission voted last week to…

    Aviation Training Center Planned for Mesa-Gateway Airport

    August 22, 2025

    Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades

    August 22, 2025

    Rezoning Recommended for 236KSF Mesa Industrial Plan

    August 22, 2025

    BEX serves architecture, engineering and construction firms as well as all the ancillary product and service categories that market to them. These include manufacturing representatives, public agencies and private real estate organizations, specialty subcontractors and services providers related to our industry.

    Our Picks

    383-Unit Multifamily Project Recommended by Goodyear P&Z

    August 22, 2025

    Aviation Training Center Planned for Mesa-Gateway Airport

    August 22, 2025

    Magazine Tackles Construction Crisis by Inspiring Teen Girls to Enter Skilled Trades

    August 22, 2025
    Contact Us

    Phone: 480-709-4190
    Address: P.O. Box 12196 Tempe, AZ 85284
    Email: sales@azbex.com

    Type above and press Enter to search. Press Esc to cancel.