Desert Regional Outlook: Nevada, Arizona, New Mexico

Profile

The Desert Mountain Region accounts for approximately 5% of total U.S. cement consumption. Arizona represents 58% of that volume, reflecting both its population scale and its industrial build-out. Nevada contributes 28%, while New Mexico accounts for the remainder. The composition of demand is relatively even across the key sectors. Public construction accounts for 36%, with construction related to high tech nonresidential accounts for 32%, and residential accounts for 31%. Each sector is rooted in solid fundamentals.

Arizona functions as the primary structural growth engine. Greater Phoenix alone anchors regional housing demand and increasingly supports advanced manufacturing and logistics expansion. Nevada operates as a cyclical amplifier due to its tourism-linked economy. During national expansions, Nevada's construction activity accelerates rapidly; during slowdowns, retrenchment can be swift. New Mexico provides baseline stability, with construction demand tied more closely to federal installations, defense spending, and energy-sector investment than to speculative private expansion.

Demographics

The Desert Mountain Region, comprised of Arizona, Nevada, and New Mexico, has a population of approximately 13 million persons. Arizona represents the dominant demographic base at roughly 7.5 million residents, with population concentrated in the Phoenix metropolitan area, which alone exceeds 5.0 million persons. Nevada supports approximately 3.2 million residents, heavily centered in the Las Vegas metropolitan area. New Mexico, at roughly 2.1 million persons, is smaller in scale, with population anchored in the Albuquerque--Santa Fe corridor. Regional population density follows the I-10 and I-17 spines in Arizona and the I-15 corridor in Nevada, reinforcing a metropolitan-centric demographic profile.

Population growth across the Desert Mountain Region is migration-driven expansion. The region attracts retirees as well as working-age households and remains one of the primary domestic migration destinations in the western United States, particularly Arizona and Nevada.

Arizona serves as the demographic anchor. The state has experienced sustained net domestic migration for more than a decade, driven by relative housing affordability, business-friendly tax policy, and employment growth in logistics, advanced manufacturing, semiconductors, and data infrastructure. The Phoenix metropolitan area captures the majority of this expansion and remains one of the largest growth corridors nationally. In-migration includes both working-age households and retirees, producing a balanced but expansionary age structure.

The Las Vegas metropolitan area accounts for the majority of Nevada's population and growth. Nevada has historically experienced some of the strongest population gains during economic expansions and more pronounced slowdowns during recessions. Recent years have again produced positive net migration, supported by relocation from California and other western states. The state's tax structure and lower housing costs relative to coastal markets continue to attract households.

New Mexico's demographic profile differs from Arizona and Nevada. Population growth has been slower and, in certain years, flat. Net migration has been modest, with some periods of outflow. Growth is concentrated in the Albuquerque metro area and select energy-related or institutional corridors. The state trends older relative to Arizona and maintains slower household formation rates. However, stability rather than contraction defines the outlook. Incremental population change supports baseline housing demand and public infrastructure maintenance.

The region's population is expected to grow by roughly 600,000 persons by the end of the forecast horizon. Natural population growth is expected to contribute roughly 100,000 persons; net state migration is expected to add 500,000 persons. Arizona accounts for the lion's share of net state in-migration. Nevada is expected to achieve sustained positive migration tied to housing affordability relative to California, while New Mexico has experienced modest but improving domestic balances.

Economy

The Desert Region encompasses three economically distinct states that collectively reflect a broad spectrum of growth dynamics. Arizona anchors the region as its primary growth engine, driven by accelerating industrial investment---particularly in semiconductor fabrication---alongside sustained population migration and a maturing professional services sector. Nevada's economy turns largely on the strength of national consumer confidence, with hospitality and entertainment remaining the dominant cyclical force, tempered modestly by a growing logistics and distribution presence. New Mexico offers the region's most stable foundation, underpinned by federal installations, defense laboratories, and energy extraction, producing steady if measured construction demand with limited downside exposure. Together, these three states generate a regional demand profile that blends high-growth industrial activity, consumer-driven cyclicality, and federally anchored stability---producing a cement demand outlook that is broadly constructive through the forecast horizon, with Arizona's industrial buildout serving as the primary upside driver.

Arizona: Arizona's economic growth rate is expected to exceed the national average through much of the forecast horizon, supported by industrial investment and migration-driven consumption. Arizona has transitioned from a housing-driven retiree economy into a diversified growth state. Healthcare, aerospace, logistics, and professional services remain foundational pillars. However, advanced manufacturing---particularly semiconductor fabrication---has materially altered the economic and construction landscape.

Large semiconductor facilities require substantial concrete-intensive site work: deep mat foundations, vibration-dampening slabs, underground utility corridors, and extensive water and wastewater infrastructure. These facilities are among the most concrete-intensive industrial projects nationally. Beyond the primary fabrication plants, supplier campuses, logistics nodes, and supporting infrastructure create a multiplier effect on regional cement consumption.

Nevada: Nevada's economy remains anchored by hospitality and entertainment. This produces elevated sensitivity to national consumer confidence. When discretionary spending rises, employment growth accelerates rapidly, driving housing demand and infrastructure expansion. When tourism weakens, retrenchment can be swift. Diversification into logistics and distribution has added some structural stability. The Las Vegas metro area has become a regional distribution hub, supporting slab-intensive warehouse construction. Nonetheless, tourism remains the dominant cyclical variable.

New Mexico: New Mexico's economy is anchored by federal laboratories, military installations, healthcare systems, and energy extraction. Energy extraction cycles influence capital investment in certain years, particularly in southeastern portions of the state. However, these effects are episodic and smaller in scale than Arizona's industrial expansion.

Residential Construction

Residential construction remains an important primary cyclical driver of cement consumption in the Desert Mountain Region. For several years net household formation has exceeded new completions in the region. This is particularly true in Arizona among the entry-level and mid-market segments. Nevada experienced a similar dynamic, particularly in Clark County, where migration flows supported strong absorption of both rental and ownership units.

Under heightened mortgage rates, single-family permitting has slowed in Arizona and Nevada. Builders have shifted toward protecting margins, slowing speculative starts and aligning production closely with confirmed buyer contracts. Multifamily developers, facing higher financing costs and softening rent growth, have also delayed new entitlements. In the mix of this slowdown, household formation continued to grow. Migration flows have moderated but remained positive. These conditions suggest that the recent softness in the residential market is result was deferred demand rather than destroyed demand.

Single Family

Single-family construction dominates the residential cement profile in this region because of its greenfield development model. Unlike dense urban markets where infill and vertical construction reduce horizontal infrastructure requirements, suburban expansion in Arizona and Nevada requires extensive site preparation and flatwork. Slab-on-grade foundations are the norm. Each subdivision demands curb and gutter installation, driveway pours, retention basins, and internal roadway networks. The cement intensity per unit is therefore elevated relative to infill-heavy regions.

Arizona leads the single-family recovery due to its scale and sustained in-migration. Nevada follows with greater volatility tied to employment conditions in tourism and hospitality. New Mexico participates modestly, with growth tied more closely to local economic stability than to migration surges.

Water allocation policy in Arizona represents the most significant structural constraint on long-term single-family expansion. Groundwater management frameworks increasingly influence subdivision approvals, particularly in peripheral corridors. These policies do not eliminate demand, but they influence pacing and geographic distribution. Development may shift toward areas with clearer long-term supply commitments rather than disappear entirely. The effect is to introduce policy sensitivity into the growth trajectory rather than to negate it.

Mortgage rates are expected to remain elevated through most of 2026. The affordability conditions that plagued 2025 are likely to remain in effect through the bulk of this year. Mortgage rates are expected to decline as inflation declines. That is not expected to materialize until early 2027. The initial decline in mortgage rates is expected to be small -- yielding small gains in starts activity.

Considerable deferred demand, however, has materialized over recent years as net household formation has exceeded new completions in the region. This pent-up demand is expected to be released once mortgage rates drop below a "threshold" interest rate. That threshold mortgage rate that begins to release the pent-up demand is estimated at 5.5%. That rate is expected to materialize mid-2027. Starts are expected to accelerate in the second half of 2027, after a sluggish first half. Strong growth rates are expected thereafter.

Beyond 2027 the structural under build is expected to be partially addressed. Master-planned communities increase output. Cement demand accelerates not only from vertical housing starts but from subdivision roadways, curbs, sidewalks, and stormwater systems. This is the phase during which the Desert Mountain Region is positioned to materially outperform national cement growth. Labor availability becomes a binding constraint, limiting how quickly builders can continue expanding output. Growth moderates but does not reverse.

Multifamily

Multifamily construction presents a different cycle. Phoenix experienced substantial multifamily expansion during the early 2020s. Deliveries peaked during 2024 and 2025, contributing to vacancy increases and moderation in rent growth. As supply outpaced absorption, developers entered a digestion phase. New starts declined materially as financing costs rose and rent underwriting became more conservative.

This digestion period is expected to extend through 2025 and into 2026. Recovery begins when vacancy rates compress and effective rents stabilize. As mortgage rates decline and broader economic conditions improve, household formation accelerates, supporting renewed absorption of rental inventory. Multifamily permitting gradually recovers during 2027 and 2028. However, long-term multifamily growth in this region is constrained by competition from single-family housing. When ownership affordability improves, some renter demand shifts toward purchase. These dynamic caps the sustained expansion potential of multifamily relative to markets where ownership remains structurally out of reach.

Residential improvement and repair activity provides the stabilizing floor of the housing sector. Migration-driven home turnover produces renovation demand shortly after purchase. Buyers invest in patio extensions, driveway expansions, pool decks, and flatwork replacement. Additionally, a growing stock of homes built during earlier cycles now requires maintenance and upgrades. While discretionary improvement spending softened during the interest-rate shock due to financing costs, it is expected to strengthen as resale transactions increase beginning in 2026.

Home improvement demand typically lags new construction recovery slightly but persists longer into the cycle. This prolongs residential cement demand momentum beyond the initial rebound in housing starts.

Nonresidential Construction

Nonresidential construction in the Desert Mountain Region is best understood as two distinct but overlapping layers: traditional commercial development driven by operating fundamentals, and a concentrated set of industrial megaprojects that operate on a separate capital cycle. The latter increasingly defines the region's cement demand profile through 2030.

Traditional commercial construction remains tied to net operating income conditions and therefore lags broader economic recovery. Office construction continues to face structural headwinds. According to CBRE and Cushman & Wakefield, vacancy rates in Phoenix metropolitan area approached 24 percent in 2025, while Las Vegas metropolitan area remained near 21 percent. Effective rents declined approximately 2 to 3 percent year-over-year, with elevated concession packages required to maintain occupancy. These conditions continue to suppress speculative office development, with new construction largely limited to build-to-suit or highly pre-leased projects. A meaningful recovery in office construction is unlikely until vacancy declines materially and rent growth turns positive, conditions that are not expected to emerge before 2027.

Retail construction remains closely aligned with population growth rather than leading it. Vacancy rates across major Desert Mountain metros remain relatively tight, generally in the 5 to 6 percent range, supported by in-migration and suburban expansion. Rent growth has moderated but remains positive at approximately 2 to 3 percent annually. Development is concentrated in grocery-anchored centers and service-oriented retail formats tied to new housing corridors. This segment provides steady but incremental cement demand rather than cyclical surges.

Hotel construction reflects a more balanced recovery. Occupancy levels in Phoenix and Las Vegas averaged approximately 65 to 70 percent in 2025, with average daily rates increasing 3 to 5 percent year-over-year. While Las Vegas benefits from convention and tourism demand, broader regional hotel development remains selective and sensitive to financing conditions. Incremental expansion is expected as business and leisure travel normalize, though this sector does not represent a primary driver of cement demand.

Against this backdrop of moderate commercial recovery, the defining feature of nonresidential construction in the Desert Mountain Region is concentrated industrial megaproject investment. Arizona stands at the center of this transformation. Semiconductor fabrication facilities have materially altered the scale and intensity of construction activity. These projects are among the most concrete-intensive industrial developments nationally. Fabrication plants require deep mat foundations, highly engineered slab systems, and extensive underground infrastructure to support water, wastewater, chemical processing, and power delivery systems. The supporting infrastructure---including substations, treatment facilities, and logistics access---adds additional layers of cement demand.

The cement intensity per dollar of capital expenditure in semiconductor fabrication materially exceeds that of distribution or traditional manufacturing. As a result, even moderate growth in capital spending can sustain elevated cement demand if project composition remains skewed toward these high-intensity facilities. Importantly, semiconductor projects are phased over multiple years, reducing single-year volatility and creating a sustained baseline of demand through the latter half of the decade. Secondary development---supplier campuses, specialty chemical plants, and packaging facilities---reinforces this effect and broadens the industrial footprint.

Nevada contributes through a different but still significant industrial profile. Battery manufacturing and electric vehicle-related facilities generate substantial slab-on-grade construction and site preparation demand. While less concrete-intensive than semiconductor fabrication on a per-square-foot basis, these projects still produce high-volume cement consumption. Their timing is influenced by federal incentives and corporate capital allocation decisions, but under baseline assumptions they support elevated activity through at least 2028.

Logistics and distribution construction provide an additional layer of industrial demand. Phoenix and Las Vegas function as key distribution corridors linking West Coast ports with interior markets. These facilities are slab-intensive and can be developed rapidly, but they are also highly sensitive to economic cycles. Warehouse construction slowed during the recent economic deceleration but is expected to strengthen during the 2027--2029 recovery window as inventory cycles normalizes.

Data center construction adds a further dimension to the region's nonresidential profile. Arizona, in particular, has emerged as a viable location for hyperscale facilities due to land availability and power infrastructure. These projects generate meaningful early-phase cement demand through foundations, substations, and supporting infrastructure. However, their phased and modular nature results in a more episodic contribution relative to semiconductor investments.

Institutional construction, including healthcare and education, provides a steady but secondary source of demand. Population growth supports hospital expansion, outpatient facilities, and school construction, particularly in Arizona's major metropolitan areas. While important for baseline stability, these projects do not materially alter overall demand trajectories.

Taken together, the nonresidential outlook for the Desert Mountain Region is defined by a clear divergence. Traditional commercial sectors remain constrained by NOI conditions and will recover gradually as vacancy declines and rent growth strengthens. In contrast, industrial megaprojects---particularly semiconductor and energy-transition manufacturing---operate on a separate capital cycle and will continue to drive elevated cement demand. The result is a nonresidential market characterized not by broad-based expansion, but by concentrated, high-intensity investment layered onto a gradually improving commercial base.

Public Construction

Public construction forms the structural anchor of cement demand in the Desert Mountain Region, but unlike maintenance-oriented regions, the dominant theme is capacity expansion rather than preservation. In Arizona and Nevada, population growth and economic expansion require continuous investment in highways, interchanges, and urban infrastructure. Corridor expansion, lane additions, and major interchange reconstruction projects generate significantly higher cement intensity than simple resurfacing programs. New Mexico participates at a smaller scale, with a greater share of spending directed toward preservation and rural connectivity.

The sustainability of this expansion is governed by funding architecture. Transportation revenue across the region remains heavily reliant on per-gallon fuel taxes, supplemented by federal transfers and selective bonding. These fuel taxes are generally not indexed to construction inflation. While vehicle miles traveled continue to increase in Arizona and Nevada due to population growth, improvements in fuel efficiency and the gradual adoption of electric vehicles constrain gasoline consumption growth. As a result, nominal revenue gains lag construction cost escalation, producing a steady erosion of real purchasing power.

This places increasing pressure on state transportation agencies to prioritize projects and phase capital programs. Arizona and Nevada have responded by making greater use of bonding to sustain throughput and accelerate key corridor expansions. Debt issuance allows near-term delivery of large-scale infrastructure, supporting cement demand in the current cycle. However, it also introduces long-term debt-service obligations that can limit future flexibility, particularly if revenue growth slows. In expansion periods, bonding capacity expands alongside economic activity, while in slower periods debt-service requirements can crowd out discretionary projects.

Federal infrastructure funding provides an essential stabilizing layer. Programs established under the Infrastructure Investment and Jobs Act have supported multi-year planning and execution, particularly for highways, bridges, and freight corridors. However, construction inflation has reduced the real value of these allocations. Under baseline assumptions, future federal programs are likely to emphasize freight mobility, grid reliability, and water security. Arizona is particularly well positioned to benefit from freight and semiconductor-adjacent infrastructure investment, while Nevada continues to receive support for urban corridor expansion and interstate connectivity. New Mexico benefits from stable, though more limited, federal participation focused on maintenance and rural systems.

Water and wastewater infrastructure represent a second---and increasingly critical---pillar of public construction in the region. Unlike transportation funding, which is tied to fuel consumption, water infrastructure relies on ratepayer-supported utilities and State Revolving Funds. These funding streams are more stable and less sensitive to economic cycles. In an arid region facing long-term supply constraints, investment in treatment capacity, reuse systems, and storage infrastructure is not discretionary. It is foundational to sustaining population and economic growth.

Arizona's scale of urban expansion supports continuous investment in water treatment and distribution systems, with high utilization of revolving fund programs. Nevada's water infrastructure investment is shaped by long-term resource planning and periodic capacity expansion tied to growth in the Las Vegas metropolitan area. New Mexico's programs are smaller in scale but provide consistent baseline demand through rural system upgrades and rehabilitation.

Overall, public construction in the Desert Mountain Region is characterized by sustained expansion layered onto a constrained funding base. Transportation programs provide the largest volume of cement demand but face real-dollar pressure from inflation and fuel-tax limitations. Water infrastructure provides a more stable and durable growth component, increasingly central to the region's long-term construction outlook. Together, these sectors ensure that public construction remains a consistent and essential contributor to cement demand through 2030, even as funding constraints shape the pace and composition of investment.

Summary

The Desert Mountain Region---comprising Arizona, Nevada, and New Mexico---represents one of the most structurally dynamic construction markets in the United States through 2030. Supported by population inflows, industrial reshoring, and infrastructure expansion, the region maintains a higher growth ceiling than many other markets. At the same time, realized growth remains conditioned by water policy, and construction labor capacity.

The cement market entered 2026 following a slowdown in 2025 driven primarily by residential construction. High mortgage rates and affordability pressures reduced single-family activity across Arizona and Nevada. At the same time, multifamily construction moderated after a period of elevated deliveries. Despite this slowdown, underlying demand remained strong, supported by continued in-migration and a persistent housing deficit. This dynamic has extended into 2026, where the market is expected to stabilize this year and usher in a recovery in 2027.

At the start of the year, everything seemed set for a gradual retreat in inflation and a reduction in long-term interest rates. The second half of the year was expected to see the beginning of a construction recovery. The escalation of the Iran conflict has influenced this transition by contributing to sustained inflation and delaying expected interest rate reductions. These conditions have extended the period of constrained residential construction. It is important to note, however, that the region's structural growth drivers remain intact. Migration continues, housing demand accumulates, and industrial investment proceeds, resulting in only a delay in the recovery process.

Arizona serves as the primary engine of regional construction activity and a key driver of cement demand. Greater Phoenix continues to absorb population inflows above the national average, sustaining demand for housing and infrastructure expansion. Residential construction remains the dominant driver, particularly single-family development, which relies heavily on slab-on-grade construction and generates high cement intensity. In addition, Arizona's nonresidential profile has been permanently elevated by large-scale semiconductor investment. Projects such as the TSMC Arizona fabs and the Intel Ocotillo expansion represent multi-year, concrete-intensive developments that provide sustained support to cement demand and diversify the region beyond housing-driven cycles.

Nevada functions as the region's cyclical amplifier. The Las Vegas economy remains closely tied to national consumer confidence and tourism flows, producing more pronounced swings in construction activity. Residential construction slowed in 2025 and remains constrained in 2026, but long-term demand is supported by migration and relative affordability compared to coastal markets. Nonresidential construction includes logistics, data infrastructure, and selective large-scale projects, such as continued expansion at the Tesla Gigafactory Nevada. Hospitality-related construction also contributes episodically, tied to broader economic conditions.

New Mexico provides stability within the region. Its economy is anchored by federal laboratories, defense installations, healthcare systems, and energy-sector activity. Construction demand is steady but modest, with public and institutional projects providing a consistent base. While growth is limited relative to Arizona and Nevada, New Mexico contributes to the region's overall stability and reduces volatility.

Residential construction remains the principal cyclical driver of cement demand across the region. Arizona and Nevada entered the mid-2020s with housing deficits created by sustained migration outpacing completions. The mortgage-rate shock of 2022--2025 deferred, but did not eliminate, demand. As interest rates begin to decline in 2027, pent-up demand is expected to be partially released, producing a strong rebound in residential construction. Growth is expected to accelerate through 2028 and 2029, with single-family construction leading due to land availability and development patterns. Multifamily construction recovers more gradually, while residential improvement provides a stable baseline.

Nonresidential construction is expected to strengthen under the combination of improvement in the business cycle brought about by lower interest rates and stronger economic conditions, and the construction of large-scale construction projects (TSMC and Intel Ocotillo).

Public construction anchors the region's outlook and supports long-term expansion. Transportation infrastructure, including highway expansions and interchange improvements, is required to accommodate rapid population growth. Water infrastructure is a critical component of regional development, particularly in Arizona, where long-term supply constraints necessitate significant investment in storage, delivery, and conservation systems. Projects such as the Colorado River water infrastructure programs and regional water recycling and pipeline initiatives underscore the importance of this sector. Federal infrastructure funding provides a baseline, though inflation has reduced real purchasing power in the near term.

The construction recovery process is expected to unfold in phases. Stabilization occurs through the first half of 2027, followed by a strong acceleration in the second half of 2027 as financing conditions improve and pent-up housing demand is released. Growth peaks during 2028 and 2029, supported by residential expansion, ongoing industrial investment, and infrastructure development. By 2030, growth moderates as the market transitions toward a more sustainable pace.