Year in Review: Arizona saw construction job gains in 2022. Will the trend continue?

As builders navigated supply chain issues for building materials, price increases and a scarcity of labor throughout the Covid-19 pandemic, efforts ramped up over the past year to increase the construction workforce.

The Arizona Office of Economic Opportunity found that from November 2021 until November 2022, the state's construction workforce expanded by more than 9,000 -- a year-over-year increase of more than 5%. In total, the state of Arizona employs more than 186,000 workers, according to the Bureau of Labor Statistics.

Some 800 jobs were added in November alone.

That year-over-year influx is made up of a combination of workers moving into the state as well as the results of a workforce outreach in high schools, in colleges and among those looking to pivot careers, said Tom Dunn, president of the Arizona Builders Alliance.

"The next couple of years, there's a looming fear of a recession, but I think it's going to be a recession where the workers are still going to be in demand," Dunn said. "This market is on fire still. In the back of my mind, I think we're going to have a steady market.

A robust pipeline

In the Valley, many contractors and developers have their pipelines full through 2023 with some work even booked into 2024, Dunn said. Developers are currently working to catch up with a backlog of supply, with 35 million to 47 million square feet of space under development in the third quarter. Potential tenants looked to Arizona for most small to mid-sized buildings, as well as some larger, 1 million-plus square-foot warehouses.

"Because of the user demand for new facilities to manufacture, distribute and house talented employees, we're seeing healthy numbers in the construction industry," said Chuck Carefoot, president of Ryan Companies' Southwest division. "I would not call it a robust labor market -- it has not flipped that quickly. As we and our trade partners look out into 2023, availably for predictable work that trade contractors can bank on -- they are looking to build their backlog of business. ... Our work becomes pretty predictable and, in turn, we're seeing more interest today from our trade partners in our work than we have seen in a year and a half."

Minneapolis-based Ryan Cos. -- which is a full-service real estate firm that develops, finances, manages, designs and builds its projects -- has about 200 employees in Arizona. Carefoot said the firm will continue to hire throughout 2023 because of the work in its pipeline. On any given day, north of 500 tradespeople can be found on Ryan Cos.' job sites throughout the state.

"I think if you spoke to just about any contractor in the market, that if we had more employees, we could probably do a higher volume of work," Rusty Martin, general manager of Graycor Construction Co.'s Southwest division. "We're constantly working to increase our staff."

Martin estimates Graycor has about $300 million worth of work between 8 to 15 projects in various stages of construction. The projects can average between 75 to 150 people per day for each project across Graycor's team members and the subcontractors hired for the job.

The TSMC effect

The $40 billion investment by Taiwanese Semiconductor Manufacturing Co. is one that's expected to have ripple effects in north Phoenix and across the Valley for years to come. TSMC first announced its plans to invest in Phoenix in 2020. Since then, sources with knowledge of the company's plans have told the Business Journal that the chipmaker's campus at full build-out could total six factories, while the company has also said it is working with 40 suppliers that are moving or expanding to the Phoenix area and in Pinal County south of the Valley.

TSMC announced earlier in December that it will build a second fab in north Phoenix to produce 3-nanometer chips by 2026 and significantly increase its investment in the state. With thousands of construction workers already building the TSMC plant already, that figure could double to more than 20,000 workers, Dunn said.

"That's just a huge boom for the economy and is driving up wages drastically," he said.

Though Dunn and Martin have found that there is an effect on the availability of tradespeople locally, many specialized workers have come in from out-of-state to build TSMC. Carefoot said that, because of the specialized and technical standards TSMC requires to build its facilities, there could be more opportunities for upward mobility within the labor market for workers to climb the ranks of the trades.

Opportunities for construction workers

Because of the tight labor market, older workers retiring from the industry and the demand to build new projects throughout the state, Dunn, Carefoot and Martin said there are upward and lucrative opportunities for new construction workers.

"The sky's the limit for those younger folks getting into the industry," Dunn said. "There's a vacuum right now where new people into the industry can achieve more success at a faster pace than, say, they could have 10-15 years ago."

Martin added that Graycor needs project superintendents, which is one job where people are starting to age out throughout the industry. He said Graycor likes to put workers on the path to developing into a superintendent, which is aided by a mentorship program where young recruits are paired with industry veterans.

"There's always been a need to constantly replenish our workforce in Arizona," he said. "These are careers that one can make a pretty good living at. Introducing the young kids to that and helping them realize that the construction trades are a [viable option] for somebody. That's an ongoing effort in our industry."