Is the Phoenix construction market hot? It depends on who you ask.

Denis Bacon, managing director of Bechtel’s semiconductor segment in Reston, Virginia, has lived in the Phoenix area most of his life. If you ask him about the region’s construction environment, he’ll say the industry has always been strong.

While global tech giants like Intel have been at their semiconductor manufacturing plant in Chandler, Arizona for decades, the latest development has industry professionals eyeing the Phoenix metro area for new data centers and semiconductor factories.

Some major projects in the works include a Google’s $600 million data center in Mesa, Arizona, and two $20 billion worth of semiconductor factories in chandler

One of the main drivers of the area’s expansion is the climate, experts say. Although the heat is not for the faint of heart (the registered area 55 days above 110 degrees F this year), Phoenix and the surrounding region have little risk of natural disasters from events such as earthquakes or tornadoes. That kind of stability is huge for the semiconductor industry, which depends on avoiding disruptions and delays.

“All of these industries are targeting 100% uptime, certainly data centers and semiconductor manufacturers,” Bacon told Construction Dive. “These are large, complex facilities, and they can’t afford to go down, certainly in an unprepared way.”

In addition to tech companies, Phoenix attracts other types of corporations looking to take root thanks to its low utility costs and a business-friendly environment that benefits from measures like former Gov. Doug Ducey’s Regulatory Sandboxeswhich reduced the red tape that businesses may face in some other states.

Key ingredients

The past seven years have been banner years for the area, said Jennifer Mellor, director of innovation for the Greater Phoenix Chamber of Commerce.

In addition to large industrial projects like semiconductor factories, Mellor pointed to the education and financial services sectors, which include Arizona State University, along with offices of Wells Fargo and JP Morgan Chase, as big drivers of growth . Mellor referred to the subway’s nickname as the “Wall Street of the West.”

“The market is still strong, but it’s shifting to different industries,” Mellor said.

However, this does not mean that the area is free of concerns. A recent report by Seattle-based cost consulting firm Cumming Group found that Phoenix’s construction market volume is A 13.4% drop is expected this yeardriven mostly by the residential sector.

Mellor said the residential market will remain tight as long as interest rates are high. However, despite a projected 21.8 percent decline in residential construction market volume expected by 2023, according to the Cumming Group report, work in other sectors is keeping commercial contractors busy, said Kevin Herron, vice president cumming cost management senior.

“There’s a lot of stability and growth that’s really coming from the CHIPS side,” Herron said, referring to the $52 billion in funding that came from the Law of chips and science signed by President Joe Biden in 2022.

Phoenix and the rest of Arizona have surpassed the US in construction spending compared to their 2013 amounts.

Herron said the “huge pressure” on contractors comes from a labor shortage, with projects drawing workers from as far away as California. Other builders have them struggled to find workers as a result of megaprojects, such as TSMC’s current $12 billion semiconductor factory in Phoenix.

However, Bacon believes area contractors are attractive employers for local trade professionals.

“Our advantage here is, ‘Hey, you can be home every night and still build in Phoenix,'” Bacon said.

Is it dry?

Another concern among builders and their customers is water availability: Arizona has experienced historic droughts in recent history, some of which have even resulted in construction halted in parts of Phoenixaccording to the Associated Press.

“There’s been a lot of people moving to Phoenix and the city has grown, and at the same time, there’s a lot of water-hungry industries moving to Phoenix,” Herron said.

Projects like data centers and semiconductor factories are seen as water guzzlers, leaving some local residents worried about future development. To counter those fears, Bacon said Bechtel is working with customers to reduce the amount of water used on projects, and he doesn’t think area residents need to worry about these projects threatening the supply .

“They should have very minimal concerns, even where the water ends up being dumped. It goes back to the local infrastructure for various other uses. It doesn’t go to waste,” Bacon said.

Even with the problems it faces, the Vall del Sol construction market isn’t cooling down anytime soon.

“Southern Arizona, the Phoenix area and beyond, will continue to be very competitive,” Bacon said.