The Metro Phoenix construction industry has enjoyed an impressive growth streak since the pandemic, with mega-projects underway in the Valley that are changing the economy of the state. AZRE magazine sat down with the following members of the Arizona Builders Alliance (ABA) to learn more about the state of the market, the impact of these large projects and the major issues facing the industry.  

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The Phoenix construction industry panelists

• Justin Dent, executive vice president of operations for McCarthy Building Companies 

• Steve Grauer, Southwest regional vice president for Hensel Phelps 

• Wes McClure, CEO of Wilson Electric 

The following responses have been edited for length and clarity.  

AZRE: How has the market changed since the Metro Phoenix construction industry boom started during the pandemic?  

Steve Grauer: I think we’re still right in the middle of the boom, quite frankly. I’ve always said we have a good business environment in Arizona with responsible laws and tax policy. The number of companies that have moved here or are relocating their operations here is creating many opportunities.  

We’re also seeing competitors come to Phoenix, and while those firms are coming here, they’re not necessarily bringing busloads of people here to support the work. In past business cycles that I’ve seen, you’d have people moving all around the Southwest between the boom and bust. We joke about a lot of Californians coming here, but I haven’t seen enough workers to keep up with demand. There’s a massive shortage in the trades. 

Projects are getting bigger too — practically everyone is working on their largest project ever. There are opportunities in the short term, but there are also long-term risks we’ve yet to feel.  

Justin Dent: I would reiterate what Steve said about workforce constraints. That’s something we’ve been navigating for years, but McCarthy is working to shift the focus through our Innovation and Craft Workforce Center and partnering with West-MEC, EVIT and others to further prepare the next generation of builders. A thoughtful approach to train new professionals to do the type of work we’re talking about — whether it’s data centers, airports or hospitals.

We’re seeing a shift in the messaging around being a craft professional and the career you can build versus the traditional college path that for so many years has been talked about as the only way to go.  

The other thing I would say about the market is that we’ve recognized the benefits of collaborative delivery. That’s something we’ve been doing in Arizona for a long time. Bringing contractors on early and allowing them to get engaged in the process allows us to plan better, and then projects go smoother, benefiting everyone.  

Wes McClure: Thinking about the difference in the market before the pandemic, the types of jobs we were doing were much smaller and completely different. When everything started to pick back up again, I was surprised at how quickly the jobs came and how big they got.  

I knew TSMC coming was going to be huge for Phoenix, but I didn’t recognize that there would be another 60 companies coming here to support TSMC. The environment in California and Texas losing some of its industry because of the freeze [in 2021 that caused power disruptions] created this perfect storm where we had people coming here from all directions.  

AZRE: The size of projects getting larger has been mentioned a couple of times, with TSMC being the prime example of that in Phoenix. What
effect do these megaprojects have
on the Valley?  

JD: Without a doubt, the labor pool, which also drives cost. It takes craft professionals away from other potential projects across the Valley and elsewhere in the state. The other piece that Wes alluded to is all of the companies moving into the market to support TSMC, which again affects labor pool, cost and equipment. All of those things drive schedules at the end of the day. We keep a close pulse on the industry landscape to anticipate these factors as early as possible and ensure we can deliver on what we promised to our clients. 

AZRE: Steve, are you still seeing issues with supply chain and getting the resources needed to the job site? 

SG: What I hear from partners like Wes is that electrical gear continues to be the item with the most issues. In the past, roof insulation was a problem becuase of what happened in Texas a few years ago, but by far electrical continues to be the hardest to get. Cement was a problem because of the fly ash that goes into concrete materials, but the industry has figured out how to make that work.  

You asked about the effects of mega jobs in the Valley, and the one thing that I’d add to what Justin said is inflation. A lot of owners are worried about their projects getting done, and they don’t care about what other companies are doing. Some of them have workforce stabilization programs on their sites, which is a fancy way to say they’re going to pay premiums to craft workers to come to their job. They’re throwing money at the problem. That means everyone is poaching everybody’s people for a couple dollars more, and that cycle feeds on itself.  

AZRE: Wes, what’s going on with electrical gear that is making it so
hard to get?  

WM: Well, there’s an issue of production, and an issue with supply and demand. There are only three of four different manufacturers of switch gear, and for years, there was no need for them to expand their operations and they fell behind.  

When lead times were really bad, developers wanting to do a project would ask, “How much is it going to cost?” And because of the cost of labor and everything is going up, the answer would be, “We’re not sure.” Then they’d ask, “Well, when can we get the switch gear,” and again we’d have to say, “We’re not sure.” If you’re a developer and you don’t know the cost or when you’re going to get the equipment, that project is probably not going to happen.  

AZRE: Do you have anything to add regarding the megaprojects in the Valley?  

WM: It’s a constant battle for us to keep people. But we’ve had a lot of people come to our company because we’re employee owned, and we have a lot of benefits that some companies don’t.  

Once TSMC started construction, there was upwards of 30,000 construction workers descending on that site each day, and some people got tired of working there. It’d take them 45 minutes to get in and out of the job site. It’s funny because we’d get people asking us if we were working at TSMC, and we’d say no, and they would reply, “Okay, we want to work for you because I don’t want to go out there.”  

But it’s important to know where the market is to keep good people around. You can’t wait until they get an offer somewhere else because of what it does to their psyche. So, we have to keep communicating and reminding our folks about things like the ESOP. We just put out our ESOP statements and our stock increased significantly.  

You have to also give them a good place to work where they know they have a future and can retire here. Some of the younger guys might leave for $5 more an hour, but the average tenure of our supervision team is more than 15 years, and they know they have great retirement benefits.  

AZRE: It sounds like workforce development is the biggest concern facing the industry right now. Are there any other problems readers should know about?  

JD: A strong economy is the best way to ensure that we have quality jobs for everybody, so we need to maintain that business-friendly environment. We should try to control what we can, whether that’s with our clients or trade partners, to make sure that we’re doing everything we can to collaborate, and that will keep driving the economy forward.  

Power availability is big, especially with all the data centers coming to town, along with TSMC and Intel. As a state, we need to make sure we’re planning ahead to have the power and water needed for those industries to continue to flourish. A lot of people will be coming to Arizona thanks to these megaprojects, and that means we’ll also need more water treatment plants, airports, hospitals and schools, which is promising for future growth.    

AZRE: Is there anything else anyone wants to add before we come to a close?  

SG: A key element with the ability to effect the industry the future is succession planning. Larger companies like Hensel Phelps and McCarthy have robust succession planning, but lots of construction firms throughout the country are much smaller, but they are the heart and engine of the United States. There is private equity coming in, and no disrespect to anybody out there, but they have no clue what it takes to run a construction business. There’s a massive disconnect between what their goals are and what ours are when we’re hiring these companies to go perform this work.  

The other thing that’s going on is venture capital is starting to look at our business like it did with financial services. Incorporating more technology is probably good for our industry and maybe can help with the shortfall in manpower, whether it’s these machines that finish drywall.  

But we’re in an industry that mass produces one-of-a-kind buildings. Everything is different, unless you want the U.S. to look like the Eastern Bloc where every apartment for 10 miles looks the same. I think technology is going to help our business, but I’m not sure it will totally transform it the way it has others, unless we want to get rid of the adaptability and flexibility we have. Most of the owners and architects I work with want to make their statement and not repeat what someone else did.  

JD: As far as the future of the industry goes, something we don’t talk about enough is what AI looks like for us. McCarthy, like many, is leveraging emerging technologies such as AI and robotics to create more efficiencies in our processes. As an industry, it is part of our responsibility to recognize where this type of technology integrates into our current day-to-day to have the greatest impact on our projects and communities. For example, we’re seeing technology have a positive impact with water availability, whether that’s desalination or advance water purification, it’s helping with water conservation and reuse.

Ultimately, there’s a ton of opportunity in this industry. We have a challenge with labor, but we’re working as an industry at helping more women find a career in construction, and how we can get folks from the oil and gas industry into construction if they need to transition careers. There are lots of ways people can join us and make a difference not only in our economy, but our future infrastructure.  

WM: When it comes to technology and AI, that’s something that the ABA helps me with, because there’s not much information readily available. You can read anything on the internet, but I have no confidence in knowing what is right and what is wrong. But whenever I get something from the ABA and I see it’s sanctioned by them, I have more confidence in being able to keep up with what’s happening in the industry, and it’s easy to get left behind. 

It used to be old guys like me walking through a job site and saying, “I think this is 45% done.” Now, you can send out robots that can tell exactly how much of a job is done. Those kind of things blow me away, and there’s not a huge cost associated with it, which is great.