January 26, 2009

Statistics Canada releases non-residential permit numbers for 2008

RICHARD GILBERT

staff writer

Vancouver and Calgary have experienced a decline in the total value of building permits in 2008, which is another indication that the B.C. and Alberta economies are slowing down to a more sustainable level.

Statistics Canada reported on January 15, 2009 that investment in commercial building construction increased in seven provinces and three territories in the fourth quarter of 2008.

Two of the largest contributors (in dollars) were British Columbia, which increased 2.8 per cent to $928 million and Manitoba, which increased 16.5 per cent to $137 million.

In Vancouver, total non-residential investment spending increased by 2.2 per cent to $816.2 million in the fourth quarter of 2008.

“The small increase in non-residential building investment spending in the fourth quarter is not a sign of things to come,” said Vancouver Regional Construction Association president Keith Sashaw.

“Current non-residential investment is significant, but trending down after exceptionally high levels in early 2007.”

Non-residential investment fell 2.5 per cent to $3.27 billion in 2008 compared to the previous year.

“It is likely we will see the numbers decline in line with current market conditions,” said Sashaw.

“We are definitely in the downside of the cycle. However, the industry has come off a very robust and sustained period, and the current levels of non-residential construction are above where the industry was in mid 2006.”

The City of Calgary released a report that said the value of building permits was down 25 per cent to $4.1 billion dollars in 2008 from the record $5.6 billion set in 2007.

However, the value for 2008 is equal to the $4.1 billion five-year average for the years 2004 to 2008 and well above the $3.1 billion 10-year average for the years 1999 to 2008.

“The level of construction activity Calgary has experienced in recent years exceeds what is generally considered sustainable for a city of one million people,” said David Watson, general manager, planning, development and assessment with the city of Calgary.

According to the city, residential values were down 42 per cent to $1.5 billion in 2008 compared to $2.5 billion in 2007, and non-residential values were down 12 per cent to $2.7 billion last year compared to $3 billion in 2007.

“The $2.7 billion in non-residential activity is notable, particularly when you consider that, without the combined value of The Bow and Eighth Avenue Place at $965 million, the 2007 total would have been $2 billion,” said Watson.

“On the residential side, new applications have clearly slowed this year.”

The value of new single family projects was down 36 per cent in 2008. However, single family improvement projects were up 24 per cent, indicating a counter-cyclical trend towards smaller home renovation projects.

In 2008, there was an emphasis on major institutional and government projects, including the South Health Campus ($243 million) the Glenmore Water Treatment Plant Upgrades Program ($96 million) and the Calgary Board of Education Centre ($63 million).

Overall, spending on new projects in the institutional sector increased nearly six-fold to $614 million from $106 million in 2007, with government spending tripling to $54 million from $18 million the previous year.

According to Statistics Canada investment in non-residential building construction increased in 27 of 34 census metropolitan areas in the fourth quarter of 2008.

The largest increase occurred in Edmonton, where significant increases in the institutional and commercial components resulted in a 7.0 per cent advance to $614 million in the fourth quarter.

Investment in non-residential construction in Canada reached $11.0 billion in current dollars in the fourth quarter of 2008, up 1.7 per cent from the third quarter. The increase in current dollars was mainly the result of rises in institutional and commercial building construction.

Investors spent $6.8 billion on commercial projects, up 1.5 per cent from the third quarter, while in institutional investment rose 3.7 per cent to $2.8 billion.

Spending in the industrial component declined 1.0 per cent to $1.4 billion.

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