San Diego Construction Industry Set for Recovery Amid New Funding Sources

Author: SANCO Development

Published: 12:39 PM PDT October 1, 2024

Updated: 12:39 PM PDT October 1, 2024

San Diego's Architecture, Engineering, and Construction (AEC) industry is showing signs of recovery after a slowdown during the pandemic. Recent data from Dodge Data & Analytics predicts a 13% increase in total construction starts in the region, reaching $10.4 billion by 2025. While this is a promising upswing, it still represents a 25% decrease from the peak in 2021.

The combination of strategic public investments and new funding sources is driving the rebound, providing exciting opportunities for both public and private sector construction projects. As a residential construction company, these developments offer a chance to get involved in the transformation of San Diego’s built environment, especially as new methods like progressive design-build are expected to play a critical role in future projects.

Key Drivers of Construction Growth in San Diego

San Diego’s population is growing faster than the state average, with 3.3 million people now living in the greater metro area. The region's 2022 strategic plan prioritizes responsible growth through investments in public transportation, sustainable development, and alternative delivery methods like progressive design-build for public works projects. This approach allows public agencies to collaborate more closely with contractors, ensuring projects stay on budget and on schedule.

One of the most significant areas of growth will be non-building construction, which is expected to surge by 60% to $2.7 billion in 2025. Environmental public works projects are leading the charge, with $1.26 billion worth of project starts forecasted for that year.

Public Sector Leads the Way

While private sector construction spending has slowed, public sector projects are set to rise. The recent passage of SB 706 will allow cities, counties, and special districts to use the progressive design-build process for up to 15 public works projects exceeding $5 million each. This legislative change is critical, as many agencies are facing financial pressures and looking for innovative ways to deliver on much-needed infrastructure and community development projects.

For the residential construction industry, this shift presents opportunities to partner on public works projects that prioritize sustainable building and urban growth.

Health Care and Mental Health Projects Fuel Private Sector Growth

On the private side, San Diego’s health care sector remains a bright spot, with billions of dollars in upcoming projects. One significant ongoing project is the VA San Diego Spinal Cord Injury Center and Community Living Center, a 197,000-sq-ft facility offering advanced medical services to veterans. Set to open in 2025, the center will provide comprehensive care for those dealing with spinal cord injuries. This project, alongside others in the pipeline, underscores the demand for cutting-edge health care facilities in the region.

In addition, the passage of Proposition 1 will inject $6.4 billion into the region’s mental health resources. This funding will create new opportunities for construction companies to collaborate on projects aimed at addressing mental health and substance use disorders. These projects are more than just construction ventures—they represent a chance to rethink the region’s health care infrastructure and create lasting, meaningful change in the community.

Challenges Remain for Private Sector Development

Despite the positive outlook, some sectors face challenges. The life sciences sector, which had been booming, has slowed due to rising interest rates and an excess of available lab space. Additionally, ongoing issues like rising materials costs and a shortage of skilled labor continue to impact the construction industry across San Diego.

For residential construction companies, these challenges emphasize the importance of strategic planning and partnerships to navigate fluctuating market conditions while keeping projects on track and on budget.

Looking Ahead: Opportunities for the Construction Industry

As San Diego’s construction industry rebounds, opportunities abound for those in the residential construction sector. With the public sector leading the charge through infrastructure and environmental projects, and the private sector remaining focused on health care and mental health facilities, there are numerous ways for construction companies to make their mark on the region’s recovery.

Whether your focus is on remodels, home repairs, or new builds, it’s clear that the region is poised for growth in the coming years. Partnering with public agencies on progressive design-build projects, staying attuned to health care construction opportunities, and investing in sustainable building practices will help position companies for long-term success as San Diego’s AEC industry continues to evolve.