Arizona continues to attract developers and investors who see long-term value in repositioning multi-rental properties and updating aging multi-family buildings. Renovating a space can raise rental income and improve tenant retention, with the National Apartment Association reporting that new floors, granite countertops, or in-unit laundry alone can raise rents by $30 to $75 per month. The problem? A staggering 91% of projects go over budget. Even worse, less than 1% are finished on time.
The Fix? Choose Imperial Contracting as your general contractor. We collaborate with real estate developers and owners across the Valley to budget, plan, and complete renovations on time and within scope. Below, we’ll explain the primary cost drivers in Arizona renovation projects, many of which cause delays.
1. Renovation Scope and Project Complexity
The size and type of renovation drive most of the budget. Simple, aesthetic improvements like repainting the walls or re-tiling a bathroom cost less than complete kitchen rebuilds or layout changes. The size of the building and the number of units also affect the amount of labor and materials required for the job. Shared spaces like hallways, stairwells, or amenities add to that.
2. Condition and Class of Property
Older buildings and higher renovation costs go hand in hand. Properties built over 20 years ago, for example, might have electrical, plumbing, or roofing systems that no longer meet modern standards. Tearing down walls may expose outdated wiring, corroded pipes, or insulation with asbestos. Fixing those systems increases the budget.
The building’s property class adds another cost variable. In many cases, Class C buildings need more repairs and modernization compared to Class A or B properties. Most of these structures show years of deferred maintenance, including leaky roofs, cracked slabs, damaged window frames, and outdated HVAC units. The more upgrades a building needs to meet rental expectations, the higher the cost.
In addition, certain hazards, such as termites, mold, or water intrusion, require remediation. Contractors usually discover these problems once demolition begins, which is why they include contingency allowances from the very beginning.
3. Labor and Local Market Conditions
Higher demand during peak seasons or labor shortages can stretch timelines and raise hourly rates. To cite an example, if HVAC technicians or tile setters already have multiple jobs lined up, they’ll finish those first before starting the next project. Contractors may rearrange their queue for urgent projects, though rates tend to be higher.
Material sourcing is another factor. If certain finish materials or fixtures will be shipped from out of state or overseas, freight costs and lead times increase. Local supply-chain disruptions, such as shortages in paint or drywall, can also force substitutions that push the budget higher.
4. Materials and Finishes
The materials used, along with their quality, can raise or lower the total renovation cost. For instance, vinyl plank flooring costs less per square foot than ceramic tiles, and laminate countertops are more affordable than quartz or granite. Developers must balance aesthetics with durability, especially since using cheap finishes may reduce up-front costs but lead to higher maintenance expenses later.
5. Permits, Regulations, and Soft Costs
In Scottsdale, construction plans go through the city’s Planning and Development Department. Any project that includes structural changes, layout revisions, or system upgrades must be submitted for review before permits are issued. Fees vary based on scope, and multiple reviews may be necessary before approval.
Soft costs, including architectural drawings, engineering reports, permit fees, liability insurance, and legal filings, also add to the total budget. For buildings with shared spaces or public access, the city may require upgrades to ramps, entryways, or restrooms to meet ADA Standards for Accessible Design. Delays can happen if any documents are missing or if drawings need revisions.
6. Tenant Coordination and Unit Occupancies
If there are tenants living on-site during renovations, the project must follow a phased schedule. Contractors can only work in specific areas at a time, and all crew activity must stay within quiet hour limits or entry time restrictions. If tenants and workers will be using the same elevators or hallways, the crew may need to install barriers, control foot traffic, and take extra steps to keep the area safe.
Although unlikely, developers and property owners may need to budget for temporary housing or rent concessions if tenants must vacate their units. Lost rental income during renovations raises the overall project expense.
7. Contingency and Risk Allowances
Every renovation should include a contingency allowance. The unexpected happens in most projects, especially when renovating older buildings. Once walls open, contractors may find pest damage, dry rot, rusted plumbing, or faulty wiring. Skipping the contingency leaves no room to fix these issues without going over budget.
A general rule is to set aside 10% to 20% of the projected construction costs for contingency. Higher percentages make sense for buildings that haven’t been renovated in decades or that show signs of hidden damage.
Another thing to keep in mind is that Arizona’s monsoon season and extreme temperatures, delivery delays, or scheduling conflicts can throw off the timeline and require last-minute changes. Contingency gives the team room to handle unforeseen issues and keep the project on track.
8. Contractor Selection
The contractor’s level of expertise affects how much a renovation project will end up costing. How? First and foremost, experienced contractors give accurate estimates because they have completed similar projects before. They know how long each phase takes and what materials cost in the current market. These contractors also maintain relationships with trusted suppliers and subcontractors. Their connections help them secure better prices on materials and reliable labor at competitive rates. This network of professionals keeps project costs under control.
Arizona also has challenges that only experienced contractors understand. The extreme heat, for example, affects material selection and installation timelines. Contractors who have worked in the Grand Canyon State know which products perform best in desert conditions and when to schedule outdoor work to avoid the hottest months.
Are you ready to hire the best general contractors for the job? Imperial Contracting has over 20 years of experience completing renovation projects throughout the western United States. Aside from Arizona, the team offers multi-family housing development and construction services in California, Washington, New Mexico, Nevada, and Oregon. Contact Imperial Contracting now for a project estimate.
