The Phoenix metropolitan area must prepare for an influx of 1.1 million new residents over the next 15 years, a challenge that is already forcing developers, investors, and policymakers to rethink how and where the region can grow. According to Tom Johnston, Executive Director of the WP Carey Center for Real Estate and Finance at Arizona State University, infrastructure constraints are now shaping the future of real estate investment in ways that past growth models did not anticipate.
The Scale of Growth – and the Core Questions
The projected population increase is equivalent to adding a city the size of Tucson, Tulsa, or Buffalo to the Phoenix metro. “If Phoenix is going to grow by 1.1 million people over the next 15 years, that’s the size of Tucson, Tulsa, Oklahoma, Buffalo,” Johnston says. “You take those entire cities, and you basically are going to put them in Phoenix. Where are these people going to live? Where are these people going to work? Where are these people going to shop and dine?”
Johnston emphasizes these are not theoretical concerns. Current infrastructure, resource availability, and land ownership patterns already limit where institutional capital is deployed and which development models are viable.
Power Infrastructure: The Most Immediate Constraint
Of all the challenges facing Phoenix, the availability of electrical power stands out as the most pressing. Johnston points to the rapid arrival of data centers and advanced manufacturing facilities, such as TSMC, which require enormous amounts of electricity. “We have all these data centers coming in and they’re sucking out power,” he says. “We have manufacturers that need power. How are we going to answer that power question when it takes years to build a power plant?”
This mismatch between the extended timeline for building new power infrastructure and the immediate needs of new developments is already influencing investment decisions. Johnston raises questions about whether new reactors at Palo Verde or smaller, modular nuclear solutions will be necessary. In the meantime, limited capacity is determining which submarkets can absorb new projects and which are effectively frozen out, regardless of land availability.
Water Rights: A Patchwork of Possibility and Constraint
Water access presents a different but equally significant barrier to growth. Arizona law requires developers to prove a 100-year water supply before building new housing. “Parts of the Valley have ample water and other parts don’t, and you have to prove a 100-year supply to build a housing development,” Johnston explains.
While Phoenix is recognized for its water conservation, using no more water today than it did 50 years ago despite a much larger population, this achievement does not erase future limits. Land without secured water rights cannot be developed, creating a checkerboard of parcels that are either viable or off-limits. This disconnects development potential from historical growth corridors and existing infrastructure, complicating investment strategies for both public and private entities.
Urban Density vs. Sprawl: A Shift in Market Preferences
The tension between expanding outward and building upward is becoming more pronounced. Johnston says the decision about whether to prioritize urban infill or continue suburban expansion will define the region’s development trajectory. “The real question is, what are the trade-offs? Are we going to be more urban? Are we going to continue to build out because we’ve always had an abundance of land, or are we going to be more dense?”
Current market signals indicate growing demand for urban infill projects over suburban developments. “On the residential market, it’s soft,” Johnston says of peripheral areas. “The urban land opportunities are going to be more active than something on the periphery because there’s more activity in urban markets. People don’t want to live as far as they used to.” Retail and industrial projects are increasingly focusing on central locations, reversing the traditional pattern of following residential sprawl.
Transportation infrastructure will play a critical role in this equation. “Are we going to have more public transportation or more freeways?” Johnston asks. The answer will determine which parcels are accessible and attractive to developers and which will be left behind due to poor connectivity.
Land Ownership: The Hidden Limits to “Abundant” Land
Phoenix’s reputation for unlimited land availability is misleading when ownership and regulatory factors are considered. Johnston notes that much of the land in the region is controlled by federal, state, or county authorities or is reserved for parks. “You have to look at developable land,” Johnston says. “You have federal land, you have state-owned land, you have county land. You’ve got to have parks. So who owns that land? Where is it? Does it have power? Does it have water? How do we get people to those developable parcels?”
These factors mean that large areas appearing available on maps are, in practice, locked away from timely development. Restrictions on state trust land, federal policies, and the absence of infrastructure connections can render parcels undevelopable for the foreseeable future, further limiting where growth can occur.
Environmental Pressures Are Changing Development Patterns
Environmental factors are increasingly influencing both policy and private investment decisions. Johnston, who grew up in Phoenix, describes how the urban heat island effect and changes in local climate are becoming more significant. “When I was a kid, the monsoon season, those storms rolled in regularly. But because we have this heat island with all the concrete and asphalt, we don’t have the storms like we had when I was a kid because it’s a little bit hotter and it takes longer for the city to cool at night.”
These changes affect the cost and livability of different neighborhoods and building types. As cooling costs rise and weather patterns become less predictable, developers are weighing the long-term sustainability of various project types and locations.
Policy Decisions Will Shape the Next Phase
According to Johnston, the resolution of these constraints will depend on public policy choices made in the coming years. “There’s a lot of trade-offs we have to look at as we move forward,” he says, listing power providers, utilities, government regulation, and land ownership as key variables.
Johnston’s Center at ASU is planning a significant program for fall 2026 to systematically evaluate these trade-offs. The answers will determine not only where Phoenix can grow, but also whether the region can accommodate 1.1 million new residents without infrastructure failures that limit economic growth.
For institutional investors, the implications are clear: traditional assumptions about Phoenix’s growth potential are no longer reliable. The most valuable land will not be the cheapest or the most plentiful, but the parcels that already have power, water, and access in place. As public policy and infrastructure realities catch up with demographic forecasts, capital will flow to sites that have solved these foundational challenges—leaving others behind, regardless of location or price.
