Construction Industry in Most Provinces Set for Bounce-back Year

Construction activity in most Canadian provinces should bounce back in 2021 from the COVID-19-related dip. However, that’s not true for everywhere—the Prairies are still likely to struggle.

That’s the bottom line in a market intelligence report called, From lockdowns to locking in for recovery, prepared by global real estate and infrastructure development company BTY Group.

The report indicates that prospects for 2021 are much brighter than in 2020 when the industry declined 8.5 per cent. The value of construction starts is projected to rebound to $80 billion in 2021, up substantially from $60 billion in 2020.

The outlook is positive for all segments, with industrial, residential—especially multi-family—and engineering and roadwork having the sharpest upticks. Office and retail will have flatter growth trajectories.

However, according to the study, the continuing impacts of COVID-19 on construction are being felt unevenly by province and sector. This, in turn, creates a mixed economic outlook across the country. Ontario, Quebec, British Columbia and the Atlantic provinces are expected to fare relatively well, unlike the Prairie provinces.

And while the residential forecast grew strongly in late 2020, uncertainty remains about longer-term expansion given the sharp drop in immigration and reduced foreign direct investment due to the pandemic.

Infrastructure, renewable energy and industrial building are forecast to be the top-performing sectors, with mega projects in B.C., Quebec and Ontario counterbalancing declines in commercial and leisure sectors. Investment in renewable energy is also the bright spot in Alberta, which, like most provinces, is also increasing investment in infrastructure to boost the economies.

Industry is Resilient

“The construction industry’s ability to rally after pandemic lockdowns and return to work safely reflects the resilience and adaptability it has shown through past crises and economic downturns,” said BTY Managing Director Toby Mallinder. “In the longer term, we are expecting changes driven by COVID-19—especially in technology—to accelerate improved productivity. Achieving—and surpassing—pre-2020 construction activity levels still depends on a robust economic recovery supported by a speedy, successful and sustained vaccine rollout.”

The report forecasts that construction costs will escalate in Canada. Moderate hikes of 3 per cent to 5 per cent may be expected in Ontario, Quebec, and B.C., and low escalation of 1 to 3 per cent in Alberta, up to 2 per cent in Saskatchewan and the Atlantic provinces, and between 1 per cent and 3 per cent in Manitoba.

“With Canada’s economic growth forecast projected to return to positive territory in 2021, the overall outlook for construction remains favourable, albeit with some regional variation,” the report notes.

Here is a synopsis of the report by province:

Ontario

The province’s already robust infrastructure program—bolstered by increased government stimulus spending and strong jobs recovery—will help offset sharp declines in commercial building and a projected dip in housing starts. GDP growth is expected to be 5.6 per cent in 2021 before slipping to 4.1 per cent in 2022. Multiple LRT projects in the greater Toronto and Ottawa areas, the redevelopment of Centre Block in Ottawa, a refurbishment at Bruce Power, and build of the Gordie Howe bridge in Windsor will keep activity levels high.

British Columbia

The province was on a roll prior to COVID-19 and has maintained much of that momentum. Mega energy projects such as Site C, the upcoming Patullo Bridge replacement, and $2.3-billion SkyTrain extension will keep B.C. construction buoyant. Together with a long roster of major infrastructure projects and government stimulus spending, the industry will be able to face the decline in residential building. The province escaped any major COVID-19 shutdowns in construction.

Alberta

The second sharpest economic contraction among provinces—largely due to the cutback in the energy sector—will prolong the return of construction to pre-COVID-19 levels. However, the bright spot remains a rapidly growing private sector investment in renewables. Alberta has 75 solar and wind projects underway worth about $8 billion.

Saskatchewan

Continuing weakness in the energy and mineral mining sectors is slowing recovery. Still, booming agri-food production and exports, as well as government stimulus, will help the province weather the storm until a full recovery can take hold.

Manitoba

Construction will decline across the board in Manitoba as major projects wind down. Like the $500-million Manitoba Restart Program, new government infrastructure spending will help soften the blow and build on already-planned infrastructure investments of $3 billion over the next two years. 

Quebec

With multiple major transportation projects underway, supported by added government investment in infrastructure, it’s only a matter of time before the non-residential sector returns to pre-2020 levels. The province is adding $2.9 billion in infrastructure spending in the 2020-21 fiscal year. Residential recovery may take longer to gain momentum while still remaining one of the hottest markets in the country.

Atlantic Canada

Buoyed by major capital spending, Nova Scotia and New Brunswick will bounce back stronger and faster than Prince Edward Island and Newfoundland and Labrador. Slow—and even negative population growth—will be an added drag.

Residential

On the residential front, Ontario is expected to lead the way in 2021 with 82,000 housing starts, followed by B.C. with 36,300, and Alberta with 26,100.

Nationally, housing starts are expected to be between 211,000 and 213,000 in 2021, and between 202,000 and 208,000 in 2022, up from an estimated 172,000 to 213,000 in 2020.