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Non-residential construction will sustain industry

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by Richard Gilbert last update:Oct 2, 2014

Private sector investment in new non-residential construction is expected to keep construction workloads stable in Canada in 2013, which will offset a slowdown in residential activity.

 

“Private sector investment in the energy, mining, and commercial sectors will complement major ongoing and new infrastructure projects to keep construction workloads stable as new residential building cools in most of Canada,” said a report released by BTY Group.

A Canadian market intelligence report by BTY said Canada will record substantial investment and a steady flow of immigrants in 2013, which will help to sustain construction levels and help meet a growing need for skilled labour.

BTY forecasts that Gross Domestic Product in Canada will grow by 2.1 per cent in 2012 and 2.0 per cent in 2013, despite a slower than expected U.S. recovery, recession in the European Union and lower growth rates in Asia.

The report said strength in both residential and non-residential construction in B.C. will generate economic growth, which is above the national average.

“Major new investments in commercial-retail, as well as mining and energy, will lead the way in B.C.,” said Joe Rekab, managing partner at BTY Group.

“The province’s residential sector, bolstered by continued strong in-migration, will buck the national cooling trend. Metro Vancouver will see the highest concentration of new commercial and residential activity.”

The report said investment in the oil and gas, and mining sectors is especially strong, led by the $4.7 billion Kitimat Liquid Natural Gas Terminal and Pipeline and Rio Tinto Alcan’s $3.3 billion modernization of its Kitimat smelter.

Earlier this month, Chevron Canada Limited signed a deal with Apache Canada Ltd. to hold a 50 per cent interest in the construction and operation of the facility in Bish Cove, about 650 kilometres north of Vancouver.

The largest single investment in B.C. is the federal government’s $8 billion order for seven non-combat ships, which is an eight-year contract.

In the commercial and retail sector, five new office towers, with a total value of $1.6 billion, are underway in downtown Vancouver.

Discount retailer Target will revamp 26 Zellers stores across B.C. over the next two years at a cost of $10 million a store.

However, construction cost escalation is estimated to be between one to two per cent in 2013.

Record levels of oilsands investment in Alberta between 2010 and 2012 is fueling strong and sustained construction activity.

GDP growth in Alberta for 2013 is estimated to be between 2.6 per cent and 3.6 per cent.

Drawn by jobs in the oilsands, net migration has been projected to reach 57,800 in 2012 and remain elevated at 48,500 in 2013.

Growth will be driven by increased capital spending in both public and private sectors, including transportation, social infrastructure and commercial and retail projects.

Calgary alone has nearly three million square feet of new office space under construction for delivery by 2014.

Retailer Target’s arrival in Alberta alone will see a $232 million investment in revamping Zellers stores and building a warehouse/distribution centre.

High levels of sustained investment in oilsands and energy, as well as high net migration will generate construction cost escalation between 3.0 and 5.0 per cent in 2013.

Saskatchewan is forecast to be Canada’s growth leader in 2013, with GDP increasing between 2.7 per cent and 4.0 per cent.

Major drivers are continuing strength in the oil and gas sector and $12 billion in ongoing investment in potash mining, despite some scaling back in response to softening global demand.

Net migration in 2012 has been projected to surpass 2011’s record of 11,742, and then slip back to 11,000 in 2013.

Strong investment in mining and resources, as well as high net migration will generate construction cost escalation between 5.0-6.0 per cent in 2013. According to Statistics Canada, investment in non-residential building construction amounted to $12 billion in the fourth quarter of 2012, up 1.0 per cent compared to the previous quarter.

This was the third consecutive quarterly increase and was led by higher spending for commercial and industrial buildings.

Commercial building investment increased 1.7 per cent to $7.2 billion in the fourth quarter of 2012, which is the fifth consecutive quarterly gain. Industrial investment was up for the fifth consecutive quarter, rising 3.3 per cent to $1.6 billion.

Spending in the institutional component totalled $3.1 billion in the fourth quarter, a 1.8 per cent decline from the previous quarter.

last update:Oct 2, 2014

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