With the first quarter of 2024 behind us, it’s important to pause and take a closer look at the trends that have shaped the current state of the construction industry in the greater Phoenix metropolitan market and the factors positioned to further influence its outlook in the months ahead. Over the past few years, the market has witnessed a significant influx in construction activity to keep up with the growing number of both residents and businesses. As the economy experiences a period of uncertainty, owners and developers alike remain cautiously optimistic as they plan their next moves and navigate a new era.
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Although this uncertainty has caused certain subsectors to take a step back, others have flourished. High interest rates have led lenders to tighten financing, resulting in increased pressure on construction labor and materials pricing and reduced prospects for projects such as speculative warehouses. On the contrary, projects intended for specific end-users, such as the Super Radiator Coils built-to-suit manufacturing facility in Mesa, Arizona, have experienced a steady demand. This 150,000-square-foot design/build facility for Super Radiator Coils, a heat exchanger unit manufacturer, is being constructed to meet the company’s specialized operational needs as it evolves its presence in the region.
Alongside built-to-suit industrial projects, the student housing and senior living sectors also remain prosperous in the Phoenix market for 2024. These specific developments are meticulously planned, taking into account current and anticipated residential needs within each demographic area. Since these sectors experience a steady demand, they are less sensitive to economic fluctuations and market uncertainties. A testament to this trend is the upcoming VERVE student living project in Tempe, Arizona. Currently in the preconstruction phase, VERVE Tempe will break ground in summer 2024, bringing sixteen stories, 240 units and ground floor retail space near the Arizona State University campus. Senior Living developers and operators are still experiencing demand. Brinkmann is set to break ground on a 226-unit independent living, assisted living and memory care facility near Old Town Scottsdale, Arizona. As these projects progress, additional opportunities will continue to emerge, further supporting Phoenix’s reputation as a dynamic and progressive real estate market.
Looking ahead, the construction landscape in Phoenix anticipates continued growth, innovation and prosperity. The shifted focus from speculative to built-to-suit developments emphasizes a shift towards customized solutions that align with the client’s specific needs to ensure efficiency and long-term viability. Additionally, the resilience of sectors like student housing and senior living reflects a deep understanding of demographic dynamics and a commitment to delivering tailored residential experiences.
As economic conditions fluctuate, owners, developers and stakeholders are encouraged to maintain a flexible, proactive approach, focusing their attention on data-driven insights to pinpoint new and evolving opportunities. By leading with this approach, the Phoenix construction market is meeting current demands while laying the groundwork for a successful, resilient future. As we move through the remainder of 2024, creative thinking, strategic insights and innovative solutions will continue to be key drivers of the industry in Phoenix and beyond.
Author: Joe Strobbe is vice president of Brinkmann Constructors. He has more than 20 years of experience in construction and executive leadership. He is focused on growing Brinkmann’s presence, team, and opportunities in the Southwest as well as the day-to-day operations of the Arizona office.
