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2025 Forecast Tries to Clarify an Uncertain Market

by | Feb 7, 2025 | Forecast Event, Recent Events | 0 comments

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.

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STEVE BOSCHEN
ASSISTANT DIRECTOR - INFRASTRUCTURE DELIVERY & OPERATIONS
ADOT

 

Steve Boschen currently serves as an assistant director of ADOT overseeing the Infrastructure Delivery and Operations (IDO) Division, which oversees all statewide construction project delivery, including ADOT and Local Public Agency projects, and statewide operations and maintenance. Steve is responsible for Project Management, Operations, Project Delivery, Contracts and Local Public Agency areas of ADOT, which include a total of 20 groups and districts. This includes the development, construction, maintenance and operation of more than 28,000 lane miles of interstate and state highways in Arizona. He rejoined ADOT in October 2012 as a deputy state engineer for Project Delivery after a 20-year stint in the engineering consulting industry. Steve has a bachelor’s degree in civil engineering from the University of Arizona and is a registered professional engineer in the state of Arizona.

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WENDY COHEN
PRESIDENT & CEO
KITCHELL

 

As President & CEO, Wendy leads Kitchell Corporation with a collaborative spirit. Kitchell Corporation includes four diverse operating companies, Kitchell Contractors Inc., Kitchell Capital Expenditure Managers Inc., Kitchell Development Company Inc., and American Refrigeration Supplies. Wendy is passionate about developing a strategy and culture that allows for innovation and change in the construction industry. With 30 years of experience, Wendy's journey in the building industry has been marked by significant roles as a general contractor, construction manager, consultant, and owner, culminating in her current leadership at Kitchell. Wendy is a proven leader and trusted advisor and is committed to developing future leaders and implementing innovative ideas to improve the built environment. Her experience leading high-performance teams paved the way for her current role at Kitchell, which is consistently ranked among the top Construction Management, Program Management and General Contracting firms both regionally and nationally. Beyond her corporate achievements, she is active in the community and industry. She serves on the boards of the Greater Sacramento Economic Council, Greater Phoenix Economic Council, and Greater Phoenix Leadership. In 2024, Wendy and Kitchell were accepted into the Global Design Allowance as the newest Board of Director and joined the American Contractors Insurance Group (ACIG) as its Executive Member.

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ERIC FROBERG
CITY ENGINEER
CITY OF PHOENIX

 

Eric has served as City Engineer for the City of Phoenix since January 2019, which included a 6 month assignment as Interim Director of Water Services, a 5 month assignment as Interim Director of Public Works, and a 1 month assignment of Street Transportation. Eric possesses over a quarter century of relevant public works and land development engineering experience. Prior to joining the City of Phoenix, most recently Eric was the New Mexico Operations Manager for TYLIN International and prior to that was a Senior Project Manager for RBF Consulting. After spending two decades working as a private consultant, Eric desired to utilize his engineering and management expertise in a way that more directly benefited the public. As the City Engineer for the nation’s 5th largest City, Eric is responsible for overseeing the selection of architects, engineers & contractors and the execution the City's 5-year, $11 billion Capital Improvement Program, including serving as the program manager for the current $500M General Obligation Bond program. Eric holds a bachelor’s degree in Civil Engineering from the University of Arizona and is a Registered Professional Engineer in Arizona, California, and New Mexico. Eric is currently a member of the Alumni Industry Council for the University of Arizona, previously held the position of State Director for ACEC-NM.

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SUSANNA STRUBLE
TOWN ENGINEER - CIP MANAGER
TOWN OF GILBERT

 

Susanna Struble is the Town of Gilbert’s Assistant Town Engineer/ CIP Manager, with more than 35 years of related private consulting and municipal engineering experience. She currently manages a team of 12 CIP project managers in the development, design and construction of a $3.5B 10 year Capital Improvement Program. Prior to joining Gilbert, Susanna served as Public Works Director/City Engineer for Coolidge, Arizona; various engineering positions with Willdan Engineering which included serving as the regional manager for the Phoenix operation for over 10 years; City Engineer in Show Low Arizona and Assistant County Engineer in Eagle County, Colorado. Ms. Struble is a Registered Professional Civil Engineer in the State of Arizona; she received her Bachelor’s Degree in Civil Engineering from University of Wyoming.

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ALISON TYMKIW
CITY ENGINEER
CITY OF SCOTTSDALE

 

Alison Tymkiw is currently serving as the City Engineer for the City of Scottsdale, Arizona. Alison is responsible for administering the City’s Capital Improvement Program and she manages the Capital Project Management Division which is responsible for the planning, design and construction of infrastructure improvement around the city. Alison has worked for the City of Scottsdale since 1998 and has previously held the positions of Civil Engineer, Project Manager and Senior Project Manager prior to promotion to her current role as City Engineer. Prior to joining the City of Scottsdale, Alison worked for engineering design and consulting firms, first in Connecticut and then in the local Phoenix area. Alison holds a Bachelor of Science degree in Civil Engineering from Lehigh University, and she is a Registered Professional Engineer in the State of Arizona.

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AALIYAH KOELZER
DATABEX RESEARCHER
BEX

 

Aaliyah is a DATABEX Researcher specializing in Arizona’s Commercial Real Estate Market. Starting his construction career in the field, Aaliyah gained hands on skills working as a stonemason in the northern state of Montana. After obtaining a Bachelor’s degree in Economics and Mathematics, he moved to the Grand Canyon State to gain further experience in Real Estate Development and Construction Management.

Currently Aaliyah manages and maintains the entirety of DATABEX’s active Industrial, Hospitality, Healthcare, Office and Retail projects in
Arizona.

Three interesting facts about Aaliyah:
- He is an avid angler and bowhunter
- He enjoys playing the guitar in his free time
- He played soccer for the Montana State University Men’s Soccer Club

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ANDREA HOWARD
MARKET RESEARCHER
BEX

 

Andrea is a market researcher for BEX. She specializes in scouring permit sites, council meetings, and any other sources she can find to provide the most up to date information for the multifamily sector. Since joining the company in 2021 she has learned to spot construction trends to not only supply updates to DATABEX, but to gain insight into the shifting market.

Fun facts about Andrea
- She is originally from Texas
- She has a Bachelor’s degree in Japanese Language
- She was an Arabic linguist in the Air Force

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REBEKAH MORRIS

FOUNDER & PRESIDENT
BEX

 

Rebekah started the twice-weekly AZBEX publication in February 2010, and has since grown
the service into a multi-faceted resource for local Commercial Real Estate and A/E/C firms to find leads on upcoming projects, industry news, trends, and market insights. In 2015, AZBEX started producing events and now features four annual half-day conferences and six breakfast panels known as the Leading Market Series.

In 2016, the AZBEX Database or DATABEX was launched. Both the events and database are engineered to bring opportunities to clients – whether it’s the contacts made at a half-day conference or bi-monthly breakfast program or the early stage notice of a project in the database, every service of AZBEX is focused on bringing opportunity to clients.

Rebekah’s background as a large General Contractor enabled her to spot the opportunity to start BEX, but it is her grit, determination and eternal curiosity for the industry that has kept it going and growing each year.

Three fun facts about Rebekah:
- Hobbies include running, cooking, reading and hanging out with her husband and kids
- She has a degree in construction engineering
- She cannot whistle

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LYA PARRISH
DATABEX MANAGER
BEX

 

Lya Parrish is the DATABEX Manager for BEX, Arizona’s leading Construction Market Research company. Lya holds a Bachelor’s degree in Political Science and a Master’s degree in Policy and Applied Social Research. She has been actively studying the Arizona Construction market since 2015.

She leads a team of six full-time Market Researchers and is responsible for training and development of staff, market analytics, and development of the technical aspects of DATABEX.

Three fun facts about Lya:
- She is a Sci-Fi/Fantasy, LEGO, and cross-stitch fanatic
- She has two nearly identical cats
- Her childhood home is roughly 1,000 yards from the BEX Office in Central Phoenix

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