[Obadno]

An article that explains some of the development delays. Mainly inflation, labor issues and material shortages: https://azbex.com/market-constraints...s-in-projects/

If there has been delay's with Astra and other proposals its due to this.

Approximately 250 construction industry professionals, including 150 in-person attendees, made their way to the BEX Companies 2022 Forecast Event last Friday.

In the only event of its kind to compile market data from a proprietary statewide project database and check it against Arizona state sales tax numbers, attendees got a wide-ranging view of every major development sector beyond the single-family, owner-occupied space.

BEX Companies Founder and President Rebekah Morris welcomed attendees and offered up a quick introduction, highlighting the fact that Arizona’s economy, as measured by taxable sales, grew 19.79% Year-over-Year as of December 2020, fueled by significant population and employment growth, companies locating to the state and a massive swell in capital investment.

She was quick to point out, however, this spectacular rate of growth has thrown some significant hurdles into the workings of the construction industry, including materials shortages and ongoing supply chain/logistics issues, rapid across-the-board price increases, ongoing labor shortages, and process difficulties at the municipal level – including delays in plan reviews, permit issuance and the increasing scourge of NIMBY-ism as more and more projects encounter resistance from neighboring residents.

Those hurdles are more than just day-to-day inconveniences. Construction has traditionally significantly outpaced the broader overall economy, making up more than 15% during the boom cycle of 2004-2008 and remaining at more than 10% even as the overall economy contracted in the Great Recession. For 2018-2020, construction remained at 10% or higher while the overall economy’s rate of growth hovered around 10%-12%. In 2021, construction remained at around 10%. However, the overall economy surged to a rate of growth of almost 20%. The economy boomed while construction’s contribution remained flat.

Morris’ take: “We’ve done a really good job at diversifying our economy. That’s really good in the grand scheme of things. We’re not as reliant on construction to grow our overall economy.”

In the pre-recession peak Arizona construction activity hit $21.67B. After dropping to an average of -30% during the recession and seeing a see-saw recovery afterward, activity from 2017-2020 saw a rate of change of more than 10% each year. Current activity stands at approximately $17.9B. Unfortunately, the difference between 2020 and 2021 was negligible, with an increase of only 1.09%.

At the 2021 Forecast event, based on project data and economic growth, BEX staff predicted market activity for the year to hit $20.5B, of 16.1% Year-over-Year growth. As shown above, the actual number turned out to be $17.9B, or 1.09%.

“We projected a massive increase,” Morris told the audience. “We run the database. We have project level data to support saying, ‘Hey! The market wants to build these projects.’ We have that. We talk to developers and owners all the time. We know the demand is out there. The market did not deliver. So, what the heck happened?

“Our conclusion: We have demand. We can demonstrate demand. We’ve got demand for housing. We’ve got demand for industrial, for hospitality, even. The volume stayed flat, and prices were increasing rapidly. We couldn’t do it. The output could not keep up with what the market wanted. There’s plenty of demand there. We could have done twenty-two billion dollars. That’s the project-level data we have for 2021. We thought it should have come in at 22. It came in at 17.9. Kind of a swing and a miss. That’s significantly different. Demand does not go away, so projects that should have happened in 2021 are going to carry over to 2022. All those constraints… everything is going to kick the can… just push it out a little bit. The market can’t handle all the volume for all the projects that really want to happen.”

Market Constraints

Key factors holding back the ability to deliver are the combination of rising materials prices – along with inflation in general – and the ongoing supply chain/logistics/materials availability issues that have plagued the industry since the beginning of the pandemic.

In setting the tone of the market, Morris pointed out a key contributor to Arizona’s ongoing construction labor shortage. In the overall economy, total jobs have increased 13.58% above the pre-Recession peak in 2007. The same rebound has not been seen in construction.

In 2006, at the height of the pre-Recession boom, Arizona’s total construction employment was 240,300. In the depth of the downturn, that fell to 110,800. Disconcertingly, even with the billions of dollars in projects and 10s of 1,000s of additional workers needed, construction employment has only come back up to 175,100, remaining at 27.13% below the pre-Recession peak. Compounding the problem, even with the swell in the overall economy between 2020 and 2021, the growth in construction employment was barely detectable.