By Roland Murphy for AZBEX

We come into every year planning the way forward with the best information we have available. We draw on past performance to indicate future behavior, check the current pace and direction, and then estimate what’s going to happen next.

As with every progression over time, it’s a good idea to check the path you’re actually traveling against the roadmap you set out at the beginning. This week, more than 200 people signed up to see and hear where the Arizona construction market is headed and compare that to the projections BEX research produced in our January Forecast Event. (AZBEX, Feb. 2)

As with the Forecast Event, BEX Founder and President Rebekah Morris and key members of the Research team provided updates on the three primary market sectors (Public Infrastructure, Housing and Private Development) across the 11 main markets (Education [K-12 & Higher Ed.], Public Spaces, Transportation & Parks, Utilities, Single-family, Multifamily, Build-to-Rent, Industrial, Healthcare, Hospitality, and Office & Retail).

The presentations were centered around data harvested from the thousands of individual projects the Research team inputs, updates and tracks in the DATABEX project database over the course of a year. By following and analyzing thousands of individual projects, BEX is in a unique position to identify and determine the state of the industry and its subsectors at any given moment and across set points in time.

The Midyear Update reviews the estimates and projections made at the beginning of the year and adjusts for the second half using current year-to-date information.

State of the Market

As is the standard formula, Morris kicked off the event by reviewing major economic factors that drive Arizona construction.

As it has for the past several years, Arizona’s population growth continues to hold at an annual rate of around 1.5%. Much of that in-migration is fueled by strong employment, with the latest data showing 3.26 million jobs in the state, a 21.69% increase from the state’s previous peak in 2007.

On the construction employment side, the state has continued to add jobs, generally. Not including the 2020 anomaly, year-over-year construction employment growth has been in the 5%-10% range.

Interestingly, Morris told the group, year-to-date construction employment has turned slightly negative, falling 0.69%. She cautioned attendees not to worry too much, as a percent change of less than 1% in either direction is, for all intents and purposes, flat. Still, Arizona construction employment remains 10.15% below the 2006 peak of 240,300 jobs.

Morris then turned to construction revenues, which continued to rise. During the 2006 boom revenue hit $21.67B. In 2023 revenues were $25.8B.

In terms of construction activity over time, and again discounting 2020, Arizona has generally seen rates of change of between 10% and 20% since 2017, with 2022 cresting above 20%. That pace slowed slightly in 2023, coming in at 17%, and year-to-date for 2024 is 7.25%.

As has been the trend of the last few years, Industrial and Multifamily dwarf the other sectors in terms of market percentage. Simply put, Arizona is adding jobs and adding population, and people need places to work and places to live. The most current valuations put Industrial at slightly more than $12B, followed by Multifamily at $7.3B. The next closest sector is Transportation at $2.3B, followed by Utilities at $1.48B and Hospitality at $1.08B. The remaining five sectors are at less than $1B each.

Segmented out, the three primary areas of Arizona construction come in at Private taking 54% of market share, Housing at 27% and Public at 19%.

Morris’ state of the market portion of the presentation concluded with the top challenges facing the industry:

• Funding,
• Demand exceeding available power supply,
• Neighborhood resistance,
• Slow municipal reviews and permitting, and
• Competition for highly skilled labor.

The availability of power for the various developments, ranging from feeding the ever-growing data center segment to keeping the lights on at both new and existing residences, is a comparatively new issue, and one to which Morris and the other presenters would frequently return. Demand has risen at a rapid rate, while delivery is plagued by the same issues as any other segment, resulting in significantly extended delivery times.

The Market Sectors

As was the case with the Forecast Event summary earlier this year, there was simply too much information to put together an expansive recap for each sector in this summary. In the interests of striking a balance between concision and thoroughness, we will stick to items to watch for the rest of 2024.

K-12 – 0.9% market share, $242.8M

Key points to watch out for include the recently started trial in a lawsuit filed by districts against the State alleging Arizona has failed to meet its obligations to adequately fund schools, particularly in terms of facilities construction. In addition, cooperative purchasing processes continue to throttle competition for services, particularly for design, in public school development.

Higher Education – 0.89% market share, $240.8M

Key points to watch out for include two major projects on the horizon for Arizona State University (ISTB 9 and the McCain National Library) and the fact that there is no infusion of funds expected in the near future for higher education development. Most work in the sector is small scale, and the universities rely heavily on job order contracting for fulfillment. Industry watchers should also be aware the ongoing budget challenges at University of Arizona are expected to continue to impact planning, design and construction of projects there for the immediate future.

Public Spaces – 3.31% market share, $893.5M

In January, BEX predicted $1.1B in 2024 activity. That target will not be met, and local governments will shift toward renovations and upgrades rather than new construction. 2024 will likely be a peak year as budget constraints reemerge. Projects with dedicated revenue streams should still be secure, but development teams should expect to encounter more rounds of pricing revisions and proactive procurement for projects.

Transportation – 8.64% market share, $2.33B

The projected volume for 2024 has been revised slightly downward and is now estimated at $2.472B. Key issues to watch for over the coming year will be the fate of Proposition 479 half-cent transportation sales tax renewal in Maricopa County, the outcome of various municipal bond elections across the state, and future changes to alternative project delivery method regulations and legislation.

Utilities – 5.48% market share, $1.48B

2024 construction volume is estimated at $2.3B, and the market will likely remain above $2B for the next few years, based on available funding and future demand. Additional power generation and delivery capacities are becoming increasingly essential, and long-term water infrastructure investment is critical to continue fueling economic growth.

Multifamily – 27% market share, $7.3B

In January, multifamily construction across types was projected at $8.8B for 2024. That estimate has been revised downward to $5.33B. January through May saw only 31 project starts, which is fewer than half the number expected in January. While projects remain in queue, and new submissions are not slowing, project financing remains difficult, opposition is growing at the neighborhood and (in some cases) community levels, and the number of projects being put on hold or sold by one developer to another is increasing.

Over the course of the next 18 months, Multifamily observers should continue to expect delays and cancelations, added difficulties starting and finishing projects, and ongoing changes due to cost increases, materials and labor supplies, and growing resistance.

Industrial – 45% market share, $12.03B

Because of the massive uptick in Industrial projects and deliveries in recent years, production is currently slowing to meet demand. Vacancy is at 8.9%, which is up 1.5% from Q4 of 2023, and 30.7MSF is currently under construction. The most recent net absorption numbers were 4.5MSF. A total of 11.6MSF was delivered in Q1, compared to 3.1MSF in project starts.

Market watchers should continue to follow the ongoing surge in data center development, which is expected to occupy half the Industrial market by 2026. As noted above, utility capacity—particularly for power—will remain a challenge and could have an expanding impact on the pace of development and functional delivery.

Healthcare – 2.9% market share, $798M

Major healthcare firms continue to find building large, new hospital developments to be cost prohibitive. To that end, Banner Health scaled back its planned $400M Scottsdale Medical Center Phase I, centered around a major new hospital development, and instead produced a master plan that will start with a 119.5KSF medical office building to kick off development on the 52-acre site.

That reflects current trends in the sector. The big names still dominate, but new hospitals are prohibitively expensive at the moment and have also proven to be controversial with area residents when proposed. The master plans are scheduled for buildout across timelines of up to 20 years, and the most common development type at the moment is smaller MOBs.

Hospitality – 4.01% market share, $1.08B

In January, the estimated 2024 Hospitality construction volume was set at $1.24B. That number is unchanged moving into the second half of the year. There are several master-planned projects coming forward with hotel components included; occupancy is expected to remain at approximately 70%, and the volume of limited-service hotels in the four-story range remains strong.

Office & Retail – 2.06% market share, $557M

While Retail continues to significantly outpace Office, several major master plans have come forward recently that include Office components. Office developments are moving toward higher degrees of luxury and amenities, which may decrease the square footage while simultaneously increasing both costs and rents. As the population growth trend is expected to continue, Retail can expect to see the trend of major big box/major label developments continuing.

Conclusions

After the roundup of sector activity, Morris and the team offered up their conclusions based on the midyear data review:

• Industrial, Multifamily, Healthcare and Hospitality are slowing;
• Office & Retail, Education, Public Spaces, Transportation and Utilities (especially Utilities!) are growing;
• The economy is beginning to cool in line with the goals set by the Federal Reserve with its earlier interest rate hikes, and
• While construction employment growth has turned slightly negative, commercial real estate transactions are turning positive again.

Based on the revised activity shown year-to-date, the current construction market activity predictions have been set at $26.6B for 2024, $25.2B for 2025, and $26.7B for 2026.

Be sure to check and see how those projections turn out when the Forecast event rolls back around early next year.

By Roland Murphy for AZBEX – BEXclusive

Interest in, and activity around, public works and infrastructure projects has seen a boost in the last several years, as massive federal spending has flowed down to the local level and as local bodies work to accommodate growing populations and demands for services.

Attendees at this week’s BEX Companies Leading Market Series event, “Upcoming Public Works Projects,” held at ASU SkySong, heard from officials with three leading Valley municipalities as they detailed their plans and processes for both today and the next several years.

The panel was moderated by Jeff Hamilton—VP of transportation, business development manager for Sundt—and was made up of:

• Lance Webb, assistant city engineer, City of Mesa;
• Ryan Blair, capital improvements manager, Town of Gilbert; and
• Steve Scinto, director of engineering, City of Goodyear.

After brief opening remarks by BEX President and Founder Rebekah Morris, Hamilton quickly got down to business, giving the panelists an opportunity to summarize their municipalities’ current state of operations and planning and letting the audience know there are big things happening now, with more to come in the future.

The 10-year plan for Gilbert, for example, has a total of 421 projects with costs estimated at $4.88B in today’s dollars. In the fiscal year 2024 plan alone there are 135 active projects and 11 more budgeted, according to Blair’s introduction. Gilbert breaks projects down into eight separate categories. Leading the current pack is Water, with 48 projects and a total value of $603.8M, followed by Streets with 47 projects at $364.4M.

Scinto reminded the audience that Goodyear voters had approved a general obligation bond request last November, which included $135M for Streets & Transportation, $80M for Public Safety and $17M for Parks and Recreation. The City’s proposed five-year Capital Improvement Plan totals $570M.

In presenting Mesa’s update, Webb focused less on the hard numbers and more on the extensive range of projects the City is addressing in its across-the-board efforts to maintain and expand services and capabilities for residents. He noted Mesa generally has around 350 CIP projects in the works during any given year and shared with the audience that vertical projects have seen a significant uptick recently. According to Webb, vertical projects now account for approximately 25% of the City’s workload, with between 90 and 100 different vertically focused projects at the moment, compared to just a dozen 10 years ago.

Questions and Answers; Priorities and Challenges

Following the introductions and updates, Hamilton opened the program’s question and answer session. First off, he asked the panelists to describe their cities’ prioritization processes.

Scinto led off by saying Goodyear tries to plan out the next five years in detail and then focus on expected needs for the five after that, after which they take public feedback and engage in discussions with the City Council to set specific goals and timelines to best allocate political capital, public resources and development expertise.

Webb said contributors in Mesa are made up of 16 different departments, which his staff works closely with to prioritize and score. Proposed projects are evaluated in terms of need, timeline and potential future-versus-current cost estimates, and staff and department representatives work together to reconcile competing interests if they arise.

In Gilbert, Blair said, Capital Improvements is not the ownership entity for projects. As a result, the Town’s Office of Management and Budget meets with the various departmental stakeholders and assigns priorities between the two, which his section then works to implement.

Like their colleagues in the private development sector, public works leaders have been affected by market volatility in recent years. Hamilton asked the panelists to detail their most significant current challenges.

Webb said he has seen the major issues with materials availability start to even out, but that the currently overheated state of the labor market is presenting ongoing challenges. He said Mesa is trying to find a balance and level off those costs where possible, including locking in cost agreements where it can.

Blair said Gilbert is continuing to face struggles when it comes to materials with long lead times, such as concrete and steel. Speaking of the challenges in ensuring availability and successfully planning so as to avoid delays, he said, “You can’t buy time.” Blair added that he and his staff work closely with contractors and consultants across the process to understand risk factors to reduce and accommodate impacts where possible.

Scinto echoed Blair’s challenges with long lead times for materials, particularly steel and any components that have to be sourced overseas. He said scoping, scheduling and trying to understand every portion of the process and timelines as early as possible has become essential.

All the panelists agreed that, regardless of the delivery method, the traditional, linear approaches to design and execution no longer work well. Webb said the steps and components of a project have to be broken down early in the process and that procurements must also start earlier. He stressed that planners and providers need to ask themselves, “How can I change it up?” and that the design and construction providers need to be able to understand the components of a project, build in flexibility and be able to “explain the ‘why?’s.”

By Roland Murphy for AZBEX

The speakers at this week’s BEX Companies Healthcare Leading Market Series event showed that, while most of the crises of the last few years have passed (or at least have become the clichéd “new normal”), they taught vital lessons and influenced how development, planning and service will progress for the next several years.

Healthcare is one of the—often the—best-attended LMS sessions, and a sold-out crowd once again filled the presentation space at SkySong. As always, the panel was staffed with industry heavy hitters that anyone in A/E/C with an interest in Healthcare as a market segment would gladly make the effort to see in person. The panel consisted of:

• Wendy Cohen, President & CEO, Kitchell Corporation – Moderator;
• Sharon Harper, President & CEO, Plaza Companies;
• Rebecca Manhardt, Facilities Planning + Design, Mayo Clinic, and
• Aaron Zeligman, Senior Project Executive, Banner Health.

While past events have focused on the crisis of the moment, this year’s session showed the sector has largely weathered those storms, taken lessons to heart and is moving forward with new knowledge and an enhanced understanding of the need for flexibility and adaptability, along with a renewed focus on the overall experiences of staff, patients and their support networks.

The need for flexibility and adaptability as built-in components in healthcare’s physical structures has never been more explicitly brought into focus than during the COVID crisis. All the panelists had examples at their fingertips when Cohen asked about how the pandemic and its aftermath impacted new design and construction and the need for adaptability.

Harper cited the sixth floor of the Creighton University development at Park Central. It had originally been built as shell space for future use. During the crisis, it was fast-tracked for use as the center of the University’s grant-funded nursing program intended to quickly increase the number of trained healthcare workers in Arizona. She expressed that maintaining vertical flexibility is an exceptionally important factor in healthcare facility design.

Manhardt emphasized the need for spaces to be adaptable to meet both current and future needs. As an example, she referenced space at Mayo Clinic that had been modified to handle pre-operative needs early in the day, when most surgeries are scheduled and performed, and converted to post-operative care later in the day, eliminating periods when large areas sat dormant and enhancing staff efficiency and ability to provide consistent care.

Zeligman said that while flexibility is essential, it is impossible to actually future-proof any space and both expensive and prohibitive to actually try at too expansive a level. He said what one builds today in an attempt to handle all possible future contingencies will likely be obsolete by the time an adaptation is actually needed. “Plan, but don’t necessarily execute,” he said, telling the audience to be aware they will need to adapt space but to not get too detailed in trying to predict precisely how.

He compared healthcare and its facility design to a hub-and-spoke model and explained that as circumstances and needs adapt, what once were spokes often evolve into hubs. He said the industry cannot build spokes as future hubs, but that it must have plans in place to adapt somehow when the need for change arises.

Innovations, Focus & Ongoing Needs

The patient experience, staff needs and related issues are primary drivers in healthcare today. Items such as parking availability and orientation, along with how that parking connects to the facility, are a core healthcare design issue.

Also influencing space use is the need for family and supporting group member accommodation, particularly in neighborhoods where patients will often be accompanied by large groups of family members and others. Waiting areas, support supplies and other accommodating issues must be addressed so not only are the patients made comfortable, Harper said, but so are their groups.

Healthcare has always been a high-stress career, and COVID pushed many workers harder than anything they had ever experienced, enhancing the understanding in successful organizations that tending to staff care is one aspect of attending to patient care. Manhardt explained how design now includes optimizing exposure to natural light, providing areas of respite and other accoutrements that allow workers to maintain both their individual health and their organizational productivity.

Toward these ends, the panelists all expressed the need for collaboration and expansive interaction between facility staff and their design and construction teams. Harper emphasized the need for synergy and connection across the building team components, and all the panelists noted the benefits of working with familiar companies and people, echoing each other on the point that the more often teams work together, the more efficient they become and the more than can cross-contribute across their areas of investment and expertise.

Zeligman stressed the “bundle and save” aspect of using teams for multiple projects, saying it saves time and allows members to work together to develop creative solutions so they can be both faster and better while simultaneously tempering expectations.

Ongoing Challenges

While the code red emergencies of the past several years have largely passed and been folded into operational processes by now, many problems and challenges remain. Among those are ever-changing technologies and the need to plan, but as Zeligman said not over-plan, for accommodating them in both new and existing spaces.

There are also the ongoing economic and operational challenges faced by businesses in general and healthcare in particular. Margins are exceptionally small in healthcare, the panelists noted, and minor cost increases and revisions take a larger toll than many realize.

As with any construction and development related segment, interest rates, capitalization costs, materials and supplies, and labor all have a major impact on timelines and expenses, the panelists said.

Manhardt said optimizing the integration between new and existing spaces is an essential component and the focus must be on site logistics integrating with maintaining patient experiences as a priority. That interconnection must consider both movement and logistics, she said.

Zeligman said he did not believe the labor aspect of either development or operations could or would get better. He said the industry needs to focus on and create other ways to get things done and operate most efficiently in as many situations as possible, which he described as being able to “leverage having people do the right thing at the right time.”

As Plaza Companies focuses more on medical office and supporting space, rather than clinical, Harper kept the conversation well-grounded from the general business aspect. She reminded the audience that the Office sector has been hard hit in the post-pandemic economy, and that competition is fierce in terms of new space versus existing, or “shadow,” space that is abundant in the market.

“Programs and tenants drive everything,” she said, and design has to be flexible not only in terms of capabilities, but also of cost/SF when it comes to attracting and maintaining tenants.

Wrapping her points up concisely, Harper simply said, “At the end of the day, the tenant has to be able to afford the rent.”

By Roland Murphy for AZBEX

Every year, this turns out to be one of the hardest columns to write. It’s the classic conundrum of having too many good things to say about too many topics while still balancing priorities.

When you’re a proud data geek reporting on the event that serves as the showcase for a year’s worth of work from your fellow proud data geeks, you want to repeat every nugget, but you also want to not bog down your busy readers with a 14-page data dump or shortchange your client base who paid good money to attend the event in person.

So, with all that in mind…

The BEX 2024 Construction Activity Forecast Event was, once again, held in two sessions a week apart, falling this year on Jan. 24 and 31 and, as we did last year, taking over the Arizona Heritage Center auditorium in Tempe. The two-hour sessions wrapped up the year’s worth of work from the BEX Research staff detailing what happened in the Arizona construction market across the sectors we cover.

For those who have never attended a forecast event, 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 11 main markets (Education [K-12 & Higher Ed.], Public Spaces, Transportation & Parks, Utilities, Single-family, Multifamily, Build-to-Rent, Industrial, Healthcare, Hospitality, and Office & Retail).

The presentations are the forest-level view that results from the thousands of individual projects the team identifies, researches, inputs and updates in the DATABEX project database over the course of a year. While it takes an extraordinary amount of work to distill all those individual projects into comprehensive market overviews, it gives attendees a clear look at what the market was expected to do, what it did, and what the data indicate it will do over the next 12 months.

It also gives the staff the ability to process and really acquire an aggregated understanding of what all those individual projects mean to the Arizona construction and development communities as a comprehensive economic force.

State of the Market

Sticking to the formula that’s proven most useful over time, Morris started her market summary by noting the major economic factors that drive Arizona construction: Population Growth, Employment, and Inflation and Interest Rates.

Arizona’s population growth continues to hold at approximately 1.5%/year. 2022 nudged up to 1.7% as pandemic relocations peaked, while 2023 returned to a more standard 1.56%.

Overall employment continues to rise, reaching a total of 3.189 million jobs in 2023, a more than 19% increase over the previous peak in 2007. At 204,300 jobs, construction employment is still 15% below the prior peak of 240,300 in 2006.

Overall, the data show we were a bit overly optimistic when we gave our predictions for 2023 at last year’s event. We had initially projected 2023 total construction activity to hit $30B. We subsequently revised that downward to $28.8B. When the dust settled, the market ended the year at $26.9B.

There were a few factors that went into tinting our glasses more rose-colored than the clear light of day eventually showed. In particular, Morris said, we thought:

• Industrial lease-ups would continue at their previous rate,
• Multifamily rent increases would overcome higher capital costs and increasing construction costs,
• Public owners were able to absorb cost increases and push projects forward, and
• Perhaps the difficulties and delays in project approvals at the city level might improve.

In terms of sector distribution, the data continue to show that the once standard breakdown of 1/3 Private, 1/3 Public and 1/3 Housing is long gone, perhaps never to return. For 2023, the activity levels came in at 53.7% for Private, 27.1% for Housing and 19.2% for Public.

After recapping the state’s Top 10 capital improvement programs, Morris then dove directly into the project breakdown, covering the Public sector. Given the massive percentages Housing holds in the overall matrix and the disproportionate volume Industrial has in the Private category, those sections this year were presented by their respective dedicated BEXperts: BEX Researchers Andrea Howard and Aaliyah Koelzer. The remaining Private sectors were presented, as usual, by Database Manager Lya Parrish before Morris resumed the stage to summarize the past year and give our predictions for this year and the next two to come.

The Market Sectors

Here is where that need for balance comes into play. While each segment presentation offered extensive insights into 2023 activity levels—including what we thought would happen versus what actually happened and, in the cases where those failed to mesh, why we were off—in the interests of conciseness and benefit to those who bought tickets, we will only list the top performers in each category and our prediction for the year to come.

It should be noted that, due to overlap, not all sectors will contain all five points of information.

Public Spaces

• Top Project: Sky Harbor Terminal 3, North 2 Concourse ($325.8M);
• Top Owner: City of Phoenix;
• Top Design Firm: Arrington Watkins Architects;
• Top GC: McCarthy Building Companies;
• Projected 2024 Construction Volume: $1.19B.

Transportation & Parks

• Top Project: I-10, SR 202L (Santan) to SR 387 ($410M);
• Top Owner: ADOT (Arizona Department of Transportation);
• Top Design Firm: ADOT (in-house design);
• Top GC: Kiewit Corporation;
• Projected 2024 Construction Volume: $2.7B.

Utilities

• Top Project: SunZia SW Transmission Project ($1.5B);
• Top Owner: Pattern Energy;
• Top Design Firm: Burns & McDonnell;
• Top GC: Kiewit Corporation | MMR Constructors, Inc.;
• Projected 2024 Construction Volume: $2.3B.

Multifamily (Apartments/Condos)

• Top Project: The Astra Phoenix ($417M);
• 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 2024 Combined Multifamily Construction Volume: $8.8B.

Industrial (Warehouse & Manufacturing)

• Top Project: TSMC ($13B – adjusted for equipment & machinery);
• Top Owner: TSMC;
• Top Design Firm: CTCI;
• Top GC: Okland Construction.

Data Centers

• Top Owner: Prime Data Centers;
• Top Design Firm: Corgan;
• Top GC: Holder Construction;
• Combined Industrial and Data Center Construction Volume: $11.3B.

Healthcare

• Top Project: Banner Scottsdale Medical Center Phase 1 ($400M);
• Top Owner: Banner Health;
• Top Design Firm: SmithGroup;
• Top GC: Okland Construction;
• Projected 2024 Construction Volume: $767M.

Hospitality

• Top Project: VAI Resort ($760M);
• Top Owner: VAI Resort;
• Top Design Firm: JCJ Architecture;
• Top GC: Fisher Industries;
• Projected 2024 Construction Volume: $1.24B.

Office & Retail

• Top Project: Discount Tire Headquarters, Phase 1 ($198M);
• Top Owner: Discount Tire;
• Top Design Firm: Nelsen Partners;
• Top GC: Okland Construction;
• Projected 2024 Construction Volume: $846M.

Conclusions

After an extended and fast-paced data dump covering so many different segments of the Arizona construction market, it’s useful to take a short step back and look at what all those pieces mean overall. After the BEXperts finished their individual presentations, Morris took the stage again to thank the team and offer BEX’s conclusions for the year to come.

In short:

• Local project reviews and approvals will not get faster;
• Local opposition to projects will be an ongoing (and likely increasing) challenge;
• Prices will not come down fast enough, and
• Traditional project capital will not rush back into the market anytime soon.

New This Year!

If you couldn’t attend this year’s Forecast, a White Paper containing all the slides and write-ups of each portion of the presentation will be available for purchase. Keep watching here, at AZBEX.com and your inbox for updates and pricing.

By Roland Murphy for AZBEX – BEXCLUSIVE

Water is the only outside consumable allowed in the auditorium at the Arizona Heritage Center in Tempe.

Attendees of the initial session of BEX’s 2024 Construction Activity Forecast event this week wouldn’t have noticed, as they were hit with firehose-sized volumes of data from Minute 1.

Following the format and structure attendees have come to know and love, BEX Founder and President Rebekah Morris welcomed the audience and then launched into her ever-engaging overview of historical and current economic and construction market conditions, with current rates of change and quickfire causal explanations that held the audience’s attention even through a sea of charts and graphs.

Having set the scene, she then covered the first round of market segment recaps, covering K-12 and Charter Schools, Higher Education, Public Spaces, Transportation and Parks, and Utilities—her self-described new favorite category.

Regular Forecast attendees who expected to see the stage then turned over to DATABEX Manager Lya Parrish may have been surprised that Researcher Andrea Howard stepped up next to cover the year’s development in Housing. Howard made her first-time appearance before a Forecast audience and kept the attendees engaged with her overview of one of the state’s most dynamic construction segments.

Following Howard was another new-to-the-audience face, with Researcher Aaliyah Koelzer stepping up to present the Industrial update. Koelzer’s summary of the state’s most productive market was concise but detailed and left the audience both better informed and wanting more.

Next up, Parrish took the stage to bat cleanup, covering Healthcare, Hospitality, and Office & Retail, covering some sweeping changes and interesting surprises in these smaller but still vital market segments.

We will have a detailed recap of the event in next Friday’s issue, but even as expansively as some of our original columns can run, it will only scratch the surface of the degree of detail in-person attendees will experience. There are still seats available for the Jan. 31 session. Event information and tickets are available here.

By Aaliyah Koelzer and Roland Murphy for AZBEX

A near-capacity crowd filled a conference room at the SkySong Innovation Center this week to hear the latest trends and concerns in the Valley’s shifting Industrial development market at the BEX Leading Market Series panel.

Some of the most prominent players in the field expressed their opinions—both data-driven and personal—about how 2023 has unfolded and what lies ahead.

The panel was comprised of:

• Tammy Carr, Director of Business Development, Brinkmann Constructors – Moderator;
• Alex Boles, Senior VP of Investments and Development, ViaWest Group;
• Rusty Kennedy, Managing Director, Stream Realty Partners Industrial Division, and
• Blake Wells, VP of Preconstruction, LGE Design Build.

The event was sponsored by Brinkmann Constructors.

After a brief introduction by BEX Founder and President Rebekah Morris, the panelists wasted no time jumping into their respective takes on current market statistics.

Kennedy started off with upbeat anecdotes on 2023 productivity. He said that 13.5MSF-15MSF of net absorption in 2023 has been, “Historically the best year ever,” if one excludes the outlying 2021 and 2022 industrial booms. Furthermore, vacancy rates sit at a healthy 5.15%.

He added, however, the 49MSF currently under construction was “a possible downer,” in that it could push vacancy toward 13% if everything delivers without any space being absorbed.

Boles, who quickly set himself apart as the foremost optimist of the group, was quick to contextualize that risk, pointing out that 13% possibility “gets cut in half” if the current mega-sized projects in the pipeline and the existing supply of obsolete space are eliminated from the calculation.

Looking at challenges in the market, Boles said it is harder to develop now than it has recently been because of a trifecta of issues: capitalization challenges, high construction costs and long lead times.

Kennedy delivered his own good news, reporting that while construction costs do remain high, they have fallen around 15% from their previous highs and are expected to continue decreasing. Compounding on that point, Boles added that rent rates continue to increase, which has been a saving point for many developers.

Current Projects, Concerns and the 2024 Pipeline

Looking at the 49MSF of industrial developments under construction in the Phoenix metro area, Kennedy said 23% of space has been pre-leased or spoken for. He specifically mentioned Stream Realty’s excitement on being appointed the leasing agent on the sizable Mack Innovation Park project in Deer Valley, which has more than half of its current 950KSF of available space leased.

Kennedy also acknowledged the effect the Taiwan Semiconductor Manufacturing Company development has had on its presence in the Valley, attracting many suppliers to the region, as well as much of the labor force.

Boles and Wells both had concerns to express regarding the type of developments that quickly grew in popularity through 2021 and 2022. They both claimed the Valley has received bloated products in the form of 1MSF-plus “bombers” and spec sites that are too ambitious for the matured 2023 industrial market.

According to Wells, the market is currently too crowded, and larger projects are being cut into phases. The biggest ones being developed right now, he said, are around 300KSF. What used to be a five- or six-building campus is now one- or two-. Boles agreed and said small and mid-sized boxes were still in demand, specifically from Deer Valley down Interstate 17 to Interstate 10.

Finding Deals in a Saturated Market

Despite a strong market, opportunity acts as gold, in that it is hard to find unless you know where to look. The panelists unanimously agreed upon a difficult trifecta of prevailing fundamental market issues: high construction costs, expensive land, and tight lending.

Given these circumstances, location and size are currently crucial factors in success. According to Boles, this is expected to last for at least another six to eight months.

He added, however, that the current situation actually presents the market and industry with a much-needed opportunity to regroup and regain perspective and focus after an extended period of frenzy. He explained to the audience the Federal Reserve’s aggressive interest rate increase campaign has been part of a strategy to slow the economy from its previously unsustainable fever pitch, adding that the Fed could “quickly put its foot back on the gas” when the economy enters more stable parameters.

Staying with the economic focus, Wells again said that construction costs will likely continue to decrease in the foreseeable future, adding that site work costs are typically the overpriced variable in today’s bids.

Kennedy then gave his view on the current price of land in the Valley, focusing on the misinformation and miscommunication between landowners and developers. “Educating landowners on realistic and modern comparative prices while also utilizing possible joint venture structures has forced the market to be creative,” he said.

Advantages and Disadvantages of Booming Cities

Another issue enthusiastically taken up by the panelists was the challenges and inefficiencies city reviewers and councils have added in recent years. Imposing requirements that appear to clash with existing stipulations have caused delays in planning and design timelines. “Cities are tripping over themselves with these conflicting requirements,” Boles stated when discussing a particular unnamed project as an example, where the city required a fountain but lacked the water supply to operate one if built.

“TSMC has not helped” he added, “They have taken the attention of city planners, leaving other projects lacking the attention they need.” They have also taken the most experienced planning staff from cities, leaving existing staff members with less experience and expertise in place and slowing down the process across the board.

Boles added another difficulty is that some areas, such as Mesa and parts of the West Valley, went too far in on distribution projects and are now changing review standards to favor manufacturing-based projects that create greater numbers of long-term jobs.

Wells expanded on the difficulties with inexperienced and under-staffed planning departments, noting the review process is currently taking more than a year across the entire Valley. As a result of lower personnel counts and staff inexperience, he says an inversion has occurred in the standard review process.

In a normal environment, projects would see the greatest volume of comments, input and recommended changes at the beginning of the planning process, with the number and scope decreasing as a project makes its way through reviews.

Now, Wells said, the scale and volume of comments are increasing the farther along a project progresses, adding cost, time and complication to the process in a manner exactly the opposite of the norm.

Power supply for ongoing and upcoming projects was also deemed as one of the area’s most concerning and hardest to address inefficiencies. With the need to meet the demands of Phoenix’s construction boom, power availability lacks the necessary infrastructure. To install the utilities required to sustain the enormous amount of development, considerable thought and time are required, and both utility companies and municipalities would have had to have psychic abilities in place five years ago to accurately predict today’s needs, the panelists agreed.

Adapting New Strategies for the Near Future

Despite the current and pending challenges in the market, the panelists all remain optimistic about the Industrial construction market now and for the foreseeable future. Based on their views of a challenging but promising 15–20-year outlook, they each felt it is safe to say that Phoenix will continue to perform as one of the best markets for industrial real estate development.

Kennedy reminded the audience that the Phoenix and overall Arizona economies have diversified significantly in the last decade-and-a-half, leading to increased stability and wider opportunities. He expressed confidence the market components and players will figure out how best to interact as the “new normal” continues to expand.

Boles once again stressed that the current “little breather,” as he described the market cooldown, is a good thing, and reminded the audience that the Phoenix area’s market fundamentals remain strong.

Wells concurred, pointing out that with the slowdown, developers and their partners can once again focus on building relationships rather than rushing to put out fires in a constant frenzy. That, he said, will ultimately boost quality and strengthen both the industry and the market.

By Roland Murphy for AZBEX

More than 200 stakeholders in Arizona’s public works and infrastructure community packed the conference center at the DoubleTree by Hilton Hotel Phoenix Tempe on Wednesday for the BEX Companies’ 2023 Public Works Conference.

Attendees were treated to project and process details from a who’s who of agency leaders and public officials who shared their visions and challenges across the half-day event.

Following brief introductory remarks by event emcee Amanda Elliot, redevelopment program manager for the Town of Gilbert, the presentations, panels and market news came at a steady clip for the rest of the day.

Top 10 Capital Improvement Programs Across Arizona

As is the standard format at a BEX event, President and Founder Rebekah Morris jumped immediately into a deep dive of industry performance numbers.

In the not-too-distant past, Morris said, construction spending in Arizona was largely evenly divided between Infrastructure, Commercial and Housing. In-migration, job growth and other drivers have shifted those levels and pushed Commercial up to 52.4% of market share, followed by Housing at 27.2% and Infrastructure at 20.4%.

Last year, the total construction volume in the state was approximately $22B; with 2023 numbers now projected to reach $25.7B. Expressed in terms of rate of change, 2022 activity was up 24.1% and 2023 year-to-date is 15.1%.

Next, she broke out the Top 10 Capital Improvement Plans by total amounts. Following a trend of the past few years, City of Phoenix narrowly once again took the lead position. At $10B, Phoenix narrowly edged out the Arizona Department of Transportation, which came in at $9.57B. The only member of the top ten with a five-year program of less than $1B was City of Glendale with $938.7M.

Nine of the top ten saw increases this year. Only Maricopa County’s showed a decrease. The County’s $1.037B was down 39.33%.

Legislative Issues Impacting the Arizona Construction Industry

The first panel discussion dealt with legislative issues affecting construction. The panel consisted of:

• Karl Obergh, Ardurra Regional Director (Moderator);
• Audra Koester Thomas, Maricopa Association of Governments chief of staff;
• Melonie Leslie, G&G Masonry president & founder, and
• David Martin, AGC President, Arizona Chapter.

Obergh started the session by asking panelists to detail the key legislative questions facing their operations. For Koester Thomas, it was the renewal of the Proposition 400 Maricopa County half-cent sales tax, which faced a tortuous process gaining approval for the 2024 ballot this year from the Arizona Legislature. Leslie discussed immigration and reform, particularly as it impacts the ongoing labor shortage in construction and elsewhere, and Martin talked about the impending sunset of state legislation allowing public entities’ use of Alternative Project Delivery Methods for horizontal discussion.

Discussing the impacts of the expiration of APDM, Martin told the audience that job order contracting, construction manager at risk and design-build project deliveries will expire in 2025 unless reauthorized by the legislature. “We’ll revert back to the low bid process for horizontal construction,” he said. “Our goal will be to get something done in the legislature to extend that for a time range further out than 2025.”

He asked audience members and public owners to lend their help to efforts to extend the authorization in the legislature and pointed out the sheer volume of work performed in Arizona under APDM contracts, implying strongly that a reversion to low-bid would be a dire circumstance.

Leslie framed immigration reform as not just a social issue but also a matter of vital importance in dealing with the ongoing shortage of construction labor. She said ongoing job training efforts, such as those included in The Carl D. Perkins Vocational and Technical Education Act, also known as The Perkins Act, were important but insufficient to meet actual needs. Leslie said legislation introduced in Congress earlier this year—commonly known as The Dignity Act—would greatly improve the available labor pool by, among other things, providing an expedited visa process for immigrants to come to the U.S. as well as providing a pathway to legal work for undocumented immigrants already in the country.

The Dignity Act is fledgling legislation with growing bipartisan support that is also intended to enhance border security and strengthen the E-Verify system.

“We’re listening to all these opportunities and we hear what’s new and what’s coming (in terms of construction projects). We have to remember we have to have people to do that. If we don’t have anybody here to do that, this is all just unfulfilled opportunities. We all need that infrastructure.”

When it came to her turn, Koester Thomas reminded attendees that Maricopa County’s growth over the last 40 years is largely the result of infrastructure investment, much of which was funded under the Proposition 400 sales tax. She then highlighted the immediate impacts on infrastructure development and investment if the tax is not renewed, including extensive project delays and cost increases.

MAG spent much of the last two years fighting in the legislature for approval of legislation to send the matter to voters. After former Gov. Doug Ducey vetoed a measure that had the unanimous support of all 32 MAG member agencies, a much more bitter and protracted fight emerged in the next legislative session. A compromise measure was eventually passed.

“We have a program with over $28B of transportation projects for the next 20 years… over half of that is dedicated from the half-cent sales tax,” she said. “It is the most instrumental funding source we have in the region to enable construction projects. It includes over 1,000 miles of new and improved arterial roadways across our region, investments in capital construction for the expansion of our transit system… and important modernization and construction projects.”

All three panelists expressed varying degrees of urgent need tempered with guarded optimism when asked about timelines and next steps for their key legislative issues.

Leslie said the Dignity Act is relatively a new legislation that has, so far, gained 20 co-sponsors and is under review in various committees. She acknowledged that the path to approval will not be immediate in the current political landscape. “With the election cycle coming next year, I don’t know that there will be a lot of activity on it other than comments and gaining co-sponsors, however, I would think that within a year… Something has to be done about the issues we’re facing, and I do expect to see a lot of traction on this within a year.”

Martin said an industry committee of contractors, owners and engineers has been assembled to bring the industry together around the issue of APDM authorization renewal. He estimated a legislative draft would be prepared in the next couple of weeks that would be shared with the community in hopes of building a coalition to move the legislation forward quickly.

Having finally secured legislative approval to send Prop 400 renewal to voters for consideration, Koester Thomas’s next activities are having the Maricopa County Board of Commissioners call for the election and then engaging in a public information campaign to build awareness and support in the voting community.

When asked what they need from the industry, Martin urged attendees to spread the word and to be vocal in their support for renewing APDM legislation. Leslie said there are no quick fixes and that reform will be a lengthy process. However, she urged attendees to contact their representatives and urge them to sign on as co-sponsors for The Dignity Act to increase its support and potential for passage in Congress.

Koester Thomas cautioned the audience not to take renewal for granted and urged attendees to engage with their personal communities and explain that the last 40 years of infrastructure development and growth are largely due to Prop 400-related investment.

Top Owner Panel #1: Tempe, Mesa & Queen Creek

The next two panels were discussions with representatives of some of the top owners from this year’s CIP review. The first was comprised of:

• Dean Howard, Alston Construction Director of Business Development (Moderator);
• Julian Dresang, City of Tempe city engineer;
• Beth Huning, City of Mesa city engineer, and
• Dave Lipinski, Town of Queen Creek CIP department director.

After introducing the panelists and letting them talk about operations and the state of projects and growth in their respective communities, Howard asked for an overview of the state of current projects in terms of on-time and on-budget performance.

Huning started the responses by saying Mesa projects are currently 69% on schedule and 79% on budget. The City’s goal is 80% for both criteria, but economic circumstances like cost inflation and materials availability have caused both schedule changes and revisions in scope.

Lipinski said nothing is currently completely on time or on budget for the same reasons, adding that the current economy and state of affairs make it impossible to project accurately and that there is only so much room to trim items in any particular project.

Dresang agreed, saying Tempe is struggling to deliver on budget, with many projects going beyond initial estimates by 30%-35%. He noted the City has had to put projects on hold or reduce scope.

When asked to explain the biggest challenge when it comes to delivering projects, Huning again said it is a combination of money and time. Long lead times for materials—more than 50 weeks in some cases—add multiple burdens to the process. She also highlighted complications arising from the sheer volume of consultants’ workloads and how those workloads result in occasionally poor quality in planning, which creates more change orders.

Asked what has changed in the last year, Huning said she has not seen much in the way of cost reductions, adding costs are generally 30% more than they were 18 months ago.

Dresang said bids are extremely inconsistent from contractor to contractor on any given item. He added that staff workloads are very heavy and that permitting takes far longer than it ideally would with full staffing.

Lipinski said the volume of work everyone is managing has made response times considerably longer but that some materials have become more readily available.

Noting the similarities in challenges facing the communities, Howard asked if the panelists had any creative ideas to improve on-time delivery.

Dresang said Tempe made heavy use of job order contracts and construction manager at risk APDM. The City sees less use of design-bid-build, except where required by federal programs. He said the City is trying to manage project workloads better and also focusing on deepening relationships and partnerships for greater collaboration and process enhancement.

Lipinski said Queen Creek focused on getting contractors and design staff involved as early as possible to predict complications and plan for solutions before problems actually arise.

Huning said Mesa had been forced to get creative in terms of value engineering and scope changes. Mesa has also undertaken efforts to keep work flowing to contractors consistently to ensure they remain on the City’s jobs and available as projects progress, rather than allowing time between projects that may lead to difficulties in scheduling when work is needed.

Howard then turned the question to the rate and quality of market participation in various project processes. Huning said contractors had shown little interest in design-bid-build projects, particularly those that are federally funded. Interest has, however, been heavy for CMAR and on-call projects.

Dresang said Tempe has also seen low contractor interest in design-bid-build but that CMAR projects get acceptable participation.

Howard segued those responses into asking if the past two-to-three years of volatility had changed panelists’ views on APDM. Dresang said Tempe is using it more as it gives the City more options. Lipinski called APDM essential.

Huning also expressed her appreciation saying APDM helps expedite projects and cut lead times, particularly on transportation projects.

The final question to the panel was to ask for advice for firms that want to work on the panelists’ projects. Huning urged contractors and designers to realistically access their workloads and to spend time getting to understand the projects before submitting proposals. She also urged them to be creative in their approaches, particularly in terms of anticipating and managing challenges.

Dresang advised them to make sure they perform currently contracted work well if they hope to secure new work in the future, and Lipinski urged them to believe in the selection and partnership process, saying, “Give us a reason to pick you.”

Top Owner Panel #2: Phoenix, Scottsdale & ADOT

The final panel of the day featured representatives from the two heaviest hitters in terms of CIP budgets and the City that has gotten the most public exposure for actual costs versus original estimates in one of the event’s liveliest sessions.

The panel was made up of:

• Kyle Ledbetter, Archer Western Construction, project executive (Moderator);
• Eric Froberg, City of Phoenix, city engineer;
• Alison Tymkiw, City of Scottsdale, city engineer, and
• Steve Boschen, Arizona Department of Transportation, infrastructure delivery & operations.

As they were introducing themselves and explaining the projects and circumstances affecting construction and planning at their respective agencies, Boschen brought up a slide that captured attention around the room.

Boschen used the slide in an attempt to explain the scale of construction cost inflation using ADOT’s “Construction Cost Index.” He reminded the audience that since 2016 the Consumer Price Index—the standard barometer for price inflation in the general economy—has gone up 49%. While inflation has sent shock waves rippling through the economy, ADOT has found that construction costs have inflated at a far greater rate and pace than consumer prices. ADOT’s Construction Cost Index shows an increase of 125%.

Between its established project needs, rising costs and instability in its funding mechanisms, among other issues, ADOT is also facing a massive funding gap over the next 25 years. Recent estimates put the deficit at $162B.

“That’s huge,” Boschen said. “A lot of people say, ‘Why isn’t ADOT doing anything about it?’ We work at the mercy of policymakers. We cannot advocate. We cannot market… So, this is where I’m asking you to be an advocate for transportation, for statewide transportation.”

The discussion then came around to Tymkiw. Many of Scottsdale’s current major projects are the result of a 2019 bond approval. Unfortunately, those projects were estimated in 2018, and costs have exploded in the intervening time. The disparity between the original amount and the actual costs has generated controversy within some portions of the community and City Council, and the matter has received extensive press coverage, particularly after the City had to add more than $50M from the general fund to cover overages.

Ledbetter then asked the panelists how public opinion impacts their short- and long-term project decisions. All agreed the impacts are significant.

Boschen reported more than 10,000 weighed in on ADOT’s recently released Long Range Transportation Plan and added the Department takes public involvement very seriously.

Froberg said public involvement in long-term planning is essential for determining priority and direction, then he evoked laughter from the audience with an example of short-term impacts. With the Arizona Diamondback’s recent victories leading to a berth in the World Series, immediately after the spot was secured this week, road closures and other planned work over the next couple of weeks were immediately put on hold to avoid inconveniencing residents and tourists during a major economic development moment.

Asked about the greatest obstacles to delivering projects on time and on budget, Tymkiw listed inflation, the ongoing labor shortage and materials availability. Boschen echoed problems with long lead times, saying it is often necessary to procure items before projects even go to bid. He said the situation is generally getting better, but the ongoing problem has made the process significantly more complex.

Froberg agreed with these difficulties and added that the quality of contractor work tends to go down when times are exceptionally busy. “Fast and wrong is still wrong,” he said. “I’d rather see you do it slower but right.”

When the question was posed asking panelists how they are planning for and responding to market conditions, Boschen said creativity in identifying and addressing problems as early as possible was essential.

Froberg said he has also started pushing back earlier in the process and prompting departments to be specific about precision and including what they need when they initially propose projects. He stressed the importance of planning ahead internally as well as with outside partners.

Tymkiw added APDM has been particularly valuable for her community and has helped to foster responsiveness, creative engineering and collaboration among the various parties.

All agreed there is a greater need to manage expectations. Froberg said it is essential to communicate with the public, internal staff and officials throughout the entire project process and to be clear about what is and is not possible.

Tymkiw said part of managing expectations is to get better with estimates and to get as much input and as many details as early in the process as possible so the project better matches what is ultimately submitted.

Boschen told the audience a key skill is learning to manage issues and triage “fires” for importance and impact as they arise. Another key item he has found useful is improved communications, including better project dashboards that show the public, partners and officials exactly where a project stands and what remains to be done until completion.

AZBEX NOTE: The BEX FY 2023-2024 CIP Special Report

As is part of the Public Works Conference every year, the event coincided with the release of the BEX FY 2023-2024 CIP Special Report. The report features detailed descriptions and line-item breakdowns of major projects from agencies around the state.

Every March, BEX Research staff begins tracking preliminary CIPs from more than 25 agencies around Arizona and spends the next six months assembling project information, cost and timeline details, and contact lists for agencies and major projects.

This year’s CIP is available through the BEX website here.

Nearly 120 people descended on SkySong this week for BEX Companies’ April Leading Market Series event. The session’s theme was “Upcoming Public Works Projects.” 

Sundt served as the event sponsor. 

After a brief introduction from BEX Founder and President Rebekah Morris, the panel of leading public works officials wasted no time diving into their current project lists, along with some spirited discussion on the state of the public project market, challenges and potential solutions. 

The panel was comprised of: 

• Moderator Jeff Hamilton—VP of Transportation & SW Region Business Development Manager, Sundt; 
• Lance Webb—Assistant City Engineer, City of Mesa; 
• Susanna Struble—Assistant City Engineer & CIP Manager, Town of Gilbert; and 
• Eric J. Froberg—City Engineer, City of Phoenix. 

Phoenix 

After settling in, Froberg led off the panelists with a rapid-fire presentation of more than 25 upcoming projects in wastewater, water, aviation, and street transportation. Among the projects mentioned were: 

• Cave Creek Water Reclamation Plant Expansion, $365M, 
• 91st Avenue Wastewater Treatment Plant 1A Rehabilitation, $60M, 

• Large Diameter Sewer Rehabilitation Program, $100M, 
• Water Main Replacement Program, $150M over five years, and 
• Phoenix Sky Harbor New Crossfield Taxiway U, $260M. 

Taken together, Froberg said Phoenix has $3.78B in water/wastewater projects, $1.7B in aviation projects and $949.9M in street projects. 

He then dovetailed his presentation into a brief overview of Phoenix’s planned $500M General Obligation bond request. The current bond recommendations provide funding for eight different project categories, including $38M for Economic Development and Education, $64M for Parks and Recreation, and $81.5M for Streets and Storm Drainage.  

Gilbert 

Following Froberg was Gilbert’s Susanna Struble. Using materials prepared for an upcoming Capital Improvement Plan stakeholders’ meeting, she walked the attendees through an overview of the 421 projects currently included in the upcoming Fiscal Years 2024-2033 CIP. The total includes 105 newly added projects. 

The project breakdown for the CIP consists of: 

• Municipal Facilities: 42 projects, $371.6M; 

• Parks & Recreation: 68 projects, $919.2M; 
• Redevelopment: 23 projects, $194.1M; 
• Storm Water: 13 projects, $46.6M; 
• Streets: 88 projects, $1.172B; 
• Traffic Control: 33 projects, $136.6M; 

• Wastewater: 60 projects, $578.7M, and 
• Water: 94 projects, $1.466B. 

In addition to recapping the CIP project suite, Struble said Gilbert will probably start discussions for a new General Obligation bond request in 2024. 

Mesa 

Following Struble was Mesa’s Lance Webb. Webb summarized Mesa’s current 13-section five-year CIP approved budget and pointed out the funding allocations for each section. Key among them were: 

• Water and Wastewater, $753M, 
• Transportation, $390M, and  
• Gas, 137.6M. 

For Fiscal Year 2023/2024, Mesa has initiated 16 non-utility and eight utility projects. There are 15 future authorized non-utility projects and six authorized utility projects. Among the projects noted were: 

• Mesa Public Safety Training Facility Improvements,  
• Police Department Headquarters Renovation, and 
• Signal Butte Water Treatment Plant Expansion. 

Webb closed his recap by telling the audience there may be a 2024 General Obligation bond request coming from Mesa as well. The key project areas would fall under Parks, Recreation and Community Facilities; Library; Transportation, and Arts and Culture. 

Challenges and Solutions 

Both during their presentations and in the question-and-answer period Hamilton led afterward, all of the panelists touched on the challenges their cities face in moving projects from planning to construction to delivery. 

Webb said, and the other panelists echoed to varying degrees, the key challenges are: 

• Cost overruns and construction material delays, 
• Increased labor costs, 
• Inflation impacts commodities, services and contracts, and  
• Keeping up with growth while maintaining current infrastructure. 

Froberg said he needs pricing to “deescalate a little” and asked vendors to do what they can to share the pain of the current problem set and work with officials to ensure projects can be begun and finished. 

He also advocated splitting projects into more manageable components when possible and issuing early letters of intent in advance of procurements to ensure materials are available when needed.  

Struble said Gilbert has taken a close look at value engineering for its various projects and has been assertive in shifting project timelines so that projects can be delayed, if necessary, without having to be canceled entirely. 

Webb agreed that reevaluating projects, adjusting timing and reprioritizing based on needs is essential in the current environment. 

All three emphasized that designers, builders and other vendors need to act as partners with the cities providing the work to the fullest extent possible. Struble recommended that firms should get to know their municipal partners, come to them with ideas and share their project visions and recommendations.  

Webb admonished vendors to evaluate their capacities and timelines correctly, to communicate consistently over the entire course of planning and development, and to let the project owner know about any potential problems or complications as early as possible.