Two large commercial construction projects that have been on hold are now getting ready to commence.  The first, a $187 million research and education building at the Phoenix Biomedical Campus is expected to bring about 2,000 new construction jobs to downtown Phoenix.  The second, the $185 million Interdisciplinary Science and Technology Building at Arizona State University is also expected to bring around 2,000 new construction jobs to Tempe.

Phoenix is one of six major metropolitan areas that have shown continuing decreases in the cost of construction.  The other cities are Las Vegas, Denver, New York, Washington, and Honolulu.  While construction costs in Phoenix continue to decline, the rate of decline has slowed with a drop of 0.42% for the first quarter of 2010.

Despite the decreases in construction costs, both residential and commercial construction in Phoenix have remained stagnant for the last two years although there are some indications that a turnaround may be imminent.  This will be good news to many Phoenix law firms who have had to lay off attorneys due to the construction downturn.

Phoenix Sky Harbor International Airport  is undergoing an extensive upgrade program between 2005 and 2010. The airport is the fifth busiest in the world, the eighth largest in the United States and the 14th largest airport in the world in terms of passengers.  It is located in one of the fastest-growing cities in the United States.  Sky Harbor has grown so rapidly that Phoenix is currently using Williams Gateway Airport in Mesa as a secondary airport.

These construction projects have cost over $700 million during 2005 and there is likely to be in excess of $200 million spent each year on construction until 2010.   The airport’s passenger count for 2004 was 39.5 million and 2005 figures were 41.2 million.  Passenger numbers are projected to approach 50 million by 2010 and so the remodelling and expansion of buildings, roads and taxiways is necessary to keep up with these increases.

The three runways have a capacity of 60 million passengers a year, but the current facilities need to be remodelled to meet that potential.  Over 100,000 passengers and more than 1,500 aircraft arrive and depart daily from Phoenix Sky Harbor, which also handles 1,000 tons of cargo per day.   Sky Harbor’s private airplane area also serves as one of eight service centres for the Medevac airline Air Evac.

More than 31,000 people work at the airport (mostly for private companies) and a study by Arizona State University has shown that the economic impact of the airport is in excess of $26 billion a year. Sky Harbor is critical to the economy of the area.  A J.D. Power and Associates report ranks Phoenix Sky Harbor as Forth in the world for passenger service and convenience.

Construction starts have rebounded since the low of last June. Nevertheless, monthly construction spending has dropped nearly 20% in the last 18 months.  The amount of construction in progress was reduced by the steep drop in starts during early 2009  but is now but is now starting to pick up  so very little further drop in jobsite activity is expected. Monthly construction spending is expected to begin rising again soon.

Commercial market indicators measuring current activity, such as occupancy and rent, are negative while longe term indicators, such as starts and cost of credit are positive. An upturn in monthly construction spending for  projects which will progressively strengthen late in 2010 and through 2011.  Some of the spending increase expected later this year will be the resumption of previously suspended projects.

The economic environment for governmental construction is now weakening after holding up through the recession.  Cash strapped local and state governments have had  to cut spending and have often done so by postponing building maintenance or expansion. The federal government has shifted its focus away from creating more jobs by building buildings to other means of job creation. The President’s proposed 2011 budget includes a small reduction in building construction funding.