The concrete jungle of Phoenix is seeing a levelling out in construction costs, but labor shortages continue to build a wall of worry for general contractors. According to a recent report by Rider Levett Bucknall (RLB), the cost to build in Phoenix has increased by 5.42% in October 2023 compared to the same month previous year, edging just above the national average increase of 5.28%. This data sets the groundwork as the city faces a mix of stable pricing and labor woes.
Although Phoenix's construction cost increase has outpaced the national rate, the quarterly surge is not as steep as seen elsewhere. A meager 1.04% bump in Phoenix compares to a 1.53% rise across North America, as reported by the Phoenix Business Journal. The numbers offer a silver lining for developers and city planners alike. However, a burgeoning industrial and advanced manufacturing sector, coupled with residential demands from population growth, continues to pump lifeblood into the city's development veins.
Scott Macpherson, an executive vice president at RLB North America, said in an interview with Phoenix Business Journal, "The Phoenix market is still extremely strong from a construction perspective driven by industrial and advanced manufacturing predominantly." On the residential front, the influx of new residents fuels the demand for diverse housing options.
Despite the stabilizing material costs, the challenge of sourcing labor lingers for valley contractors. Projects are dragging their feet as labor scarcities extend timelines for non-residential construction ventures. "A construction project is a series of activities, it's a giant to-do list — the more people you have to check off the duties of a to-do list the quicker and more efficient, theoretically, a project can get completed, and right now there's fewer folks to check off the to-do list than there were a year ago, two years ago," stated Andrew Geier, executive vice president of Layton Construction Co. in Phoenix. His comment to Phoenix Business Journal.
The silver clouds of predictability in costs are clouded by the gathering storm of labor shortages. While municipalities can breathe easy with budgeting, the intensifying search for construction workers becomes a new struggle. As the city approaches a potential decrease in demand, the pause button seems to have been pressed on future projects, introducing a new slow gear to Phoenix's usually fast-paced construction scene.
