Southwest

California remains the dominant market in the Southwest region, accounting for more than half of the region’s construction spending.

A major driver of activity here will be the rebuilding effort in the wake of the wildfires that hit Los Angeles earlier this year. Contractors in Los Angeles usually build around 8,000 houses each year, meaning that rebuilding the 10,000 homes lost in the fires will likely take several years. Los Angeles will also host the 2026 World Cup, the 2027 Super Bowl, and the 2028 Olympics, further increasing competition for labor and materials. As a result, cost escalation in the area is projected to range between 6.6% and 8.6% for 2025. This surge in activity has also stimulated the region’s residential market.

Elsewhere in the region, cities like Las Vegas and Phoenix have been struggling to balance the needs of their residents with what their environments can provide. The region’s arid climate means that there simply aren’t enough resources to support the number of people living there, prompting sustainability mandates and fierce court cases over water rights. The same climate, however, has made it an ideal location for certain kinds of manufacturing – particularly semiconductor manufacturing. This has attracted companies flush with federal money, resulting in new facilities being built near Phoenix, Las Vegas, and Salt Lake City. Reno, Nevada has also gained recognition as an affordable manufacturing hub, conveniently close to the tech centers on the other side of the Sierras.

* Other structures include religious buildings, amusement, government communications, and public recreation projects.