Here’s The Arizona Economic Development Forecast for 2023

Article originally posted on AZ Big Media on November 16, 2022

As 2022 winds down, the Arizona economic development sector has much to celebrate in the way of wins. According to the Arizona Commerce Authority (ACA), the state ranked No. 3 for economic outlook — a 10-spot jump from No. 13 the prior year. With manufacturing and semiconductor development scores such as Kohler, KORE Power, Lucid, Intel and Taiwan Semiconductor Manufacturing Company (to name a few) as well as tremendous traction in autonomous vehicle manufacturing, and dottings of retail and hospitality activity across multiple areas of the Valley, it’s no wonder the state’s economy largely flourished in 2022.

Looking ahead to 2023, will favor shine upon the Valley of the Sun once again? To help find out, AZRE connected with several Arizona economic development experts. While water conservation and a looming recession concerns are very real, the state remains poised for continued growth. As you’ll see, technology and manufacturing sectors are as strong as ever throughout Metro Phoenix and the West Valley — propelled by the fastest-growing cities in the nation — is projected to amass more economic activity for the foreseeable future. Now, take a look at what else is in store for Arizona’s economic development as we inch closer to a new year.

Meet our Arizona economic development experts:

• Chris Camacho, president and CEO of Greater Phoenix Economic Council (GPEC)

• Dr. Ian Roark, vice president of workforce development for Pima Community College

• Suzie Boyles, economic development director for the City of Buckeye

• Sandra Watson, president and CEO of Arizona Commerce Authority

• Vincent (Skip) Becker, director of project management and Development for Terrapin Care Station and president-elect for the Arizona Association for Economic Development (AAED)

AZRE: What have you identified as some of the most exciting Arizona economic development projects occurring now or slated as we move forward into 2023?

Chris Camacho (CC): The number of companies reshoring and nearshoring as part of the global industrial technology boom is historic, and Greater Phoenix is capturing a significant number of those projects. These companies bring with them major investments and massive job growth that help to advance the region and strengthen both the local and national economies.

Ian Roark (IR): In Southern Arizona, projects related to manufacturing continue to remain at the forefront of interest in our area from a workforce development perspective. Broadly speaking, this pertains to aerospace and defense, battery manufacturing and other components for electric vehicles, semiconductor manufacturing and more. 

Suzie Boyles (SB): There are many new developments occurring in Buckeye right now and you’ll continue to see them go vertical into 2023; including 7 million square feet of active development and another 2 million looking to begin construction soon. These projects include Banner Health and Abrazo Health campuses, Costco, two Marriott Hotels, Ross Dress for Less Distribution Center, as well as multiple new industrial and retail developments.

Sandra Watson (SW): We are seeing a lot of growth in advanced manufacturing projects including semiconductors, batteries, electric vehicles, aerospace and space. Some exciting projects announced recently in rural Arizona include steel manufacturer Nucor, sustainable home manufacturer ZenniHome, battery recycler Cirba Solutions, industrial materials leader Owens Corning and building materials manufacturer National Gypsum.

Likewise, in Maricopa County, there are multiple high-tech projects moving forward, such as Virgin Galactic’s spaceship assembly plant in Mesa, KORE Power’s lithium-ion battery manufacturing facility in Buckeye, Zero Electric Vehicle’s manufacturing facility in Gilbert and ElectraMeccanica’s first-ever U.S. electric vehicle manufacturing plant in Mesa.

Vincent (Skip) Becker (VSB): I believe the projects related to the semiconductor manufacturing industry are the most exciting projects in Arizona, with the expansion of Intel, and the development of Taiwan Semiconductor Manufacturing Company. I also see the EV manufacturing industry projects — the Lucid Group and Nikola Motors, just to name a few — experiencing incredible growth due to federal mandates and a shift by the consumer in the demand for EVs. The semiconductor industry supports so many business segments throughout the world that the economic impact is staggering.

We all have a better understanding of the supply constraints this industry and the EV industry have faced with their battery manufacturing, and the cause and effect that it has had on consumers. It will be interesting to see how these industries potentially become more vertically integrated as a solution to supply constraints including rare-earth elements or metals critical to their manufacturing process. 

Taiwan Semiconductor Manufacturing Company is building its $12 billion 5-nanometer chip fabrication plant in North Phoenix.

AZRE: Are there any particular areas of the that you anticipate will be hot spots for Arizona economic development?

CC: Portions of Greater Phoenix including the West Valley, the southeastern portion of the region and North Phoenix have significant private land available for development, and all of these areas are anchored by very strong current and future labor pools. In addition, there is a flight to Class A office properties in the urban centers.

IR: Given the geopolitical climate, and in a workforce development context, we anticipate further development potential in aerospace and defense, whether it’s in manufacturing or technology integration. This is the same with mining as well, as we recognize the need to ensure a secure and steady domestic supply of important minerals for defense and civilian applications. Equally, the increased focus on autonomous, connected, electric and shared autonomous, connected, electric and shared (ACES) vehicle technology will yield results for our region in the years to come. Our (Pima CC) continued partnership to support TuSimple and our recent partnership with Pony.ai, demonstrate how community colleges are at the forefront in working with ACES-focused companies to bring these new technologies to scale, and how we can help prepare the workforce for this transition.

SB: Buckeye continues to see tremendous interest in the State Route 85 Corridor and the Rail Corridor for new industrial development. In addition, we’re seeing the Verrado Way and I-10 intersection rise as a major commercial center and additional emerging commercial centers along Miller Road between I-10 and Downtown Buckeye.

SW: What’s encouraging about our recent growth is it’s taking place in all parts of our state. Pinal County has been a magnet for economic development in recent years, from electric vehicle manufacturers Lucid and Nikola to semiconductor suppliers such as Solvay and Chang Chun to battery innovators like Cirba Solutions and LG Energy Solution. Expect Pinal County to continue to support this kind of high-tech growth.

Phoenix and Tucson continue to see plenty of new expansions. Both areas are known as hotspots for technology and innovation, aerospace and defense, biotech and automated vehicles.

In addition, new broadband projects, supported by the ACA’s Broadband Development Grant Program, will drive further economic activity, especially in rural areas.

VSB: From my perspective, the hotspots for development follow the growth of surrounding workforce housing. Ten years ago, the old development perspective was “if you build it they will come.” In today’s market, you need to make sure you have a workforce and workforce housing to support your project and that points prospective companies and site selectors to locate where they see growth. Arizona as a whole is experiencing incredible growth, both rural and urban cities are attracting many diverse industries.

I see the West Valley having five of the top 10 fastest-growing cities in Arizona as a hotspot; I also recognize the diverse growth that Pinal County has experienced in the last 10 years, not only industrial but also agribusiness/agriculture, along with many other business segments. The I-10 corridor east and south of Phoenix cannot be ignored. I see continued growth in Mesa, Gilbert, Chandler and Marana. 

KORE POWER, a battery company, announced plans to develop a manufacturing facility in Buckeye.

AZRE: Which sectors, in particular, do you feel will see an uptick in activity next year (retail, industrial, office, etc.)? If you represent a specific city, you may speak to your particular region. 

CC: We’ll continue to see a significant number of semiconductor, battery and EV companies evaluate the region. Standard and advanced manufacturing projects that need to be integrated into the supply chains of the southwestern U.S. to meet consumer demands will feed into West Coast development. In addition, we anticipate the return of major office projects, and we’re seeing more venture-backed tech companies reactivating in Greater Phoenix.

IR: In the context of the previous question, we will see an uptick in aerospace and defense manufacturing and integration, as well as ACES vehicle technology applications. In addition, even with a potential economic slowdown or recession, we will continue to see expansion in the health professions ranging from medical device manufacturing, diagnostic research and development, and direct care to include behavioral health. For Southern Arizona, this area is particularly important as most of our population growth occurs from people moving here who are in the mid-career to retirement phases. We are working and living longer due to medical advancements and will continue to rely on such advancements to retain and improve our quality of life.

SB: We’re continuing to see a strong interest in industrial development across the city, but we are seeing a tremendous amount of retail growth as well. As the community historically has been underserved in retail and services, the need for new retail continues to be in high demand and we look forward to continuing to see these new developments come to the community.

SW: Arizona has emerged as a global epicenter for advanced manufacturing. We can expect to see continued projects in this sector. Roughly two-thirds of the ACA’s project pipeline comes from the manufacturing industry. In addition, the leisure and hospitality industries, which have seen tremendous growth in the past year, will continue to bounce back from the pandemic. The state’s sustainability footprint is also growing — we are seeing more battery, electric vehicle and renewable energy projects creating thousands of jobs.

VSB: I see continued growth in manufacturing, data centers, and warehousing due to Arizona’s strategic location and business environment. There are many industrial projects coming throughout Arizona. I believe we will see an increase in workforce housing. I also see an inevitable emerging industry in all segments water-related, from long-term sustainable solutions to the upper and lower Colorado River Basins, conservation, industrial solutions (use of other products in place of water in the manufacturing sectors), desalination, retention and storage.

AZRE: What challenges may slow or inhibit Arizona economic development entering a new year?

CC: We have experienced incredible job growth over the last eight years, and as Governor Ducey’s legacy is coming to an end, we’re excited about the prospect of working with the next governor to bolster Arizona’s position as a national leader in critical industries such as semiconductors, EV manufacturing, healthcare and bioscience. We need to ensure that residents across rural and urban areas of all educational levels and diverse socioeconomic backgrounds benefit from growth. At the same time, as a region, we need to be conscientious about water conservation and augmentation and ensure a resilient energy grid while we maintain positive growth across sectors.

IR: The “R” word — recession — looms large in the news and in some forecasts right now. I think that is a major driver of a potential slowdown, especially when labor force participation rates are historically high. We already have so many people disengaged from the workforce, and I struggle with the effects of this when we actually do enter a recession. Whether we are in a growth or receding period — either way — we as a state and nation need to do more to tackle the labor force non-participation rate head-on. This factor is among the largest limiting factors of our economic potential in any business cycle.

VSB: Water! Throughout time, growth has always followed water. We need to make sure we have a good long-term sustainable solution to the water situation in Arizona. Arizona needs to make sure the correct information is making its way to the consumers and site selectors to ensure we are developing/growing responsibly and not inhibiting economic development. On the internet you can find every perspective to support any position you want to take on Arizona’s water resources, some founded, many unfounded.

AZRE: What economic development trends have you identified specific to Arizona?

CC: Arizona has historically been reliant on population growth to fuel its economic position, but that has changed over the last decade with the advent of tens of thousands of new base industry- and innovation-driven jobs. Educational programs from universities and community colleges in Arizona are producing the talent necessary to meet industry needs. This has led to an evolution from standard customer service jobs to more front-office, higher-wage jobs.

IR: We really need to approach the labor force non-participation rate crisis from a diversity, equity and inclusion perspective. Labor force non-participants are largely people who have only a high school diploma or lack high school equivalency, people from low income households (disproportionately among people of color), formerly justice-involved individuals, and people struggling with behavioral health issues. We can and should do more to address this from a collective impact perspective; targeting workforce training efforts in high-wage/high-demand fields with supportive services to address barriers that people face. At Pima Community College, we are taking this issue head on through our FastTrack initiative and our partnership with the Gospel Rescue Mission Center of Opportunity. Our initial data is breaking the norm, and we are seeing  true results with respect to moving labor force non-participants into high-wage careers in IT, EMS, automotive technology, construction, and more.

SB: Availability of workforce continues to be a trend in commercial real estate. Businesses looking to locate in the Valley, and Buckeye, are looking for existing workforce capabilities, training programs and local partnerships to support the retention and growth of their workforce. In Buckeye, we place a great deal of focus on sharing the available workforce the community already has as well as building training partnerships that support local industry needs.

SW: Arizona is a national model when it comes to workforce strength and innovative workforce collaborations. An example would be Drive48, an automotive assembly training facility in Coolidge that’s training thousands for high-tech automotive careers. Drive48, which represents a unique collaboration among government, academia and industry, has trained over 2,000 Lucid employees since launching in 2021. The model has been so successful that Governor Ducey has allocated $30 million to build six additional advanced manufacturing training sites around

the state.

VSB: Water, and the sustainability efforts attached to it moving forward that will be specific to Arizona. I see a trend in international company attraction increasing in Arizona, with foreign direct investments targeting Arizona in all segments, specifically in manufacturing and supply procurement industries due to the war in the Ukraine, and China’s business climate and political position, along with the Inflation Reduction Act. Supply constraints will continue to trend downwards in areas such as building materials, concrete, power supply, and infrastructure buildout. These factors, along with increasing interest rates, are starting to have an impact on development nationwide.

BACK TO TOP FIVE