Phoenix Construction Cost Hub

Construction Cost Ranges (2024–2025)

In Phoenix, general construction cost escalation has moderated in recent quarters. According to the Mortenson Cost Index, nonresidential construction costs rose approximately 1.4% in Q3 2025 and around 5.9% year‑over‑year, reflecting a steady but controlled upward trend in input pricing and labor rates.

Rider Levett Bucknall data places Phoenix seventh among 14 major North American cities for annual construction cost change, with quarterly increases rising from under 1% in mid‑2024 to over 1.2% by Q4 2024. Labor cost pressures remain a key driver, particularly as skilled labor availability tightens.

Labor Cost Trends & Equipment Hire

Compensation costs in the Phoenix‑Mesa‑Scottsdale metro area increased by approximately 2.8% over the year ending December 2024, rising to about 3.3% by mid‑2025. Wage growth has been steady, though slightly below national averages, indicating moderate upward pressure on trade labor, journeyman, and subcontractor rates.

Equipment hire costs—daily, weekly, and monthly—are influenced by stable freight and trucking markets. Mortenson reports modest material and labor cost increases, while freight rates are expected to remain low into early 2026, helping to contain equipment mobilization and rental costs.

Local Cost Drivers

• Permits & Regulatory Requirements: Phoenix’s permitting process and compliance with local ordinances—such as the heat‑protection rule for outdoor workers—add planning and operational considerations for contractors.
• Site Access & Delivery: Tariff‑driven volatility in materials like steel, aluminum, copper, drywall, and electrical components continues to affect delivery timelines and cost predictability.
• Material Supply Chain: While some materials like lumber and flat glass remain stable, others are subject to freight and tariff pressures, prompting contractors to lock in pricing early.

General Construction Context in Phoenix

Phoenix’s construction market remains active across industrial, healthcare, retail, and mixed‑use sectors, though speculative industrial development has slowed. Developers are shifting toward infill, build‑to‑suit, and adaptive reuse projects, particularly in medical office, retail, and data center segments. Employment in construction grew by around 5% year‑over‑year through early 2025, while architecture billings suggest a measured pace of new project starts.

Current Economic Outlook for Phoenix Construction

Phoenix’s economy continues to outperform many U.S. metros, supported by strong job creation, rising wages, and sustained corporate investment. Wages in construction rose an estimated 4–5% in 2025, making Phoenix one of the most competitive markets for skilled labor. Despite high interest rates and elevated housing supply, demand remains resilient, especially in multifamily and build‑to‑rent sectors. The region’s innovation economy and infrastructure investments further underpin long‑term construction activity.