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In the ever-evolving world of commercial real estate and construction, staying informed about the latest developments is essential. At LGE Design Build, we are committed to providing you with insights into the dynamic landscapes of these industries. In this blog post, and in our Q3 Construction Delivery Outlook, we’ll explore the recent trends and challenges in two vibrant markets: the Dallas-Fort Worth Metroplex and Phoenix. From building costs to market dynamics, we’ll delve into what’s shaping these regions.

Dallas-Fort Worth Metroplex: A Hub of Growth

Healthcare, Education, and Immersive Entertainment

The Dallas-Fort Worth Metroplex is experiencing remarkable growth, particularly in sectors like healthcare, education, and immersive entertainment venues. As these industries expand, so does the need for cutting-edge construction and innovative design solutions.

Tenant Improvement Projects on the Rise

One significant trend we’ve observed is the increasing demand for tenant improvement projects. Businesses are seeking customized office and industrial spaces to meet their unique needs. This trend highlights the adaptability of the market and the importance of flexible design and construction solutions.

Expanding Texas Triangle

The Texas Triangle, which connects urban centers like Austin, Dallas Fort Worth, Houston, and San Antonio, is growing at an impressive pace. This expansion brings both opportunities and challenges for state authorities as they strive to maintain infrastructure and accommodate the influx of businesses and residents.

Cost Trends

From Q3 2022 to Q3 2023, LGE has noticed an average decrease of 10% in building costs. However, it’s important to note that sitework and electrical costs have either remained stagnant or seen slight increases. These fluctuations in costs emphasize the need for careful budgeting and cost management in construction projects.

Phoenix: Weathering Challenges

Rising Interest Rates and Water Supply Concerns

In Phoenix, rising interest rates and brief unfounded concerns over water supply shortages have influenced the real estate market. While these factors have caused a measured slowdown, Phoenix remains in the top 10% of the market, with net rent increases of 137%. This demonstrates the resilience of the Phoenix real estate sector.

Thriving Construction Sector

The construction sector in Phoenix is thriving, driven by multiyear manufacturing plant projects and a growing economy. However, a persistent shortage of skilled workers is impacting construction costs. As the demand for construction continues to rise, addressing the labor shortage will be crucial for controlling costs and meeting project deadlines.

Challenges and Opportunities Ahead

Both the Dallas-Fort Worth Metroplex and Phoenix markets present unique challenges and opportunities. At LGE Design Build, we closely monitor several key factors that shape the commercial real estate landscape:

1. Economic Conditions: Fluctuations in the economy can impact the willingness of businesses to invest in new construction projects.
2. Supply Chain Disruptions: Ongoing disruptions in supply chains can affect the availability and pricing of construction materials.
3. Material Pricing: Keeping an eye on material pricing trends is essential for cost-effective project planning.
4. Inflation: Inflation can lead to increased construction costs, making it vital to factor in inflation rates when budgeting.

As these factors continue to evolve, we remain committed to providing you with the latest insights and solutions for navigating these dynamic markets.

Download the Q3 Construction Delivery Outlook Report

The commercial real estate and construction industries in the Dallas-Fort Worth Metroplex and Phoenix are characterized by growth, challenges, and opportunities. By staying informed and adapting to market trends, businesses can position themselves for success in these vibrant markets. At LGE Design Build, we are dedicated to helping you navigate these dynamic landscapes, download our Q3 Construction Delivery Outlook for the latest research available.

The construction industry continues to remain highly active across the nation, particularly in our core markets of Dallas and Phoenix. At LGE, we are dedicated to delivering cost-effective projects and innovative solutions, even amidst ever-changing market conditions. Our team remains focused on providing exceptional service and successful project outcomes, no matter the challenges we face.

A summary of the Construction Delivery Outlook key findings include:

Construction Labor

Construction labor shortages are not expected to disappear anytime soon. Contractors are experiencing significant demand for mega-projects related to chip manufacturing plants and clean energy facilities, while still struggling with a shortage of younger workers entering skilled trades.

Supply Chain

Over the past six months, there has been an improvement in freight and supply chain issues. However, suppliers are now faced with the challenge of balancing softening demand while simultaneously dealing with the effects of past price increases and maintaining competitiveness.

Material Costs

Unpredictability within the supply chain is impacting all aspects of the construction process, including raw materials and transportation. The ongoing war in Ukraine has also led to supply barriers and increased export prices for materials such as copper and aluminum.

Demand by Product Type

There are significant variations in the year-over-year percentage changes for type of structure in square feet millions for each category of construction in the U.S. between 2022 and 2023. The industrial construction market experienced an increase in activity in 2022 with a year-over-year growth of 84.8%. However, this is followed by a significant projected decline of 28.9% in 2023.