The Canadian construction sector is experiencing hardships due to the supply chain disruptions affecting multiple projects and trade contractors are sometimes finding themselves sitting at home due to the supplier before them that was on a job that failed to deliver.
The top threats to Canada's construction industry include:
- Supply chain problems
- Spikes in cost of materials
- Rising labour costs and shortages
- Post COVID realignment of the office sector
- Logistics problems
- Geopolitical disruption (as in Russian aggression)
- Inflation
As long as inflation persists, central banks will want to tamp it down by raising interest rates. Rising interest rates scare construction investors.
Metrolinx Facebook stated that the economists believe work on a growing number of megaprojects in Canada will sustain the construction economy through any slowdown or recession that might happen in the near term.
An article in the Daily Commercial News states that John Mollenhauer, president and CEO of the Toronto Construction Association, thinks a recession is possible but with Toronto's construction sector currently on fire, that would only mean a modest reduction in activity.
The construction sector is experiencing circumstances unlike anything that Sandra Skivsky, chair with the National Trade Contractors Coalition of Canada has ever seen in her 30 plus year career.
"One of our members has this phrase: we're busy and we're breaking all at the same time. We have so many different elements at play here that have never in play before."
Chair of National Trade Contractors Coalition of Canada | Sandra Skivsky
The Bank of Canada in its July 13 Monetary Policy Report stated it expects Canada's economy to grow by:
- 3.5 percent in 2022
- 1.75 percent in 2023
- 2.5 percent in 2024
The bank believes inflation will remain around 8 percent in the next few months but it's projected to decline to about 3 percent by the end of 2023.
Canada is unique in comparison to the U.S. in that there is more immigration - the target for 2022 is 410,000 - with new Canadians flocking to cities. And they all need homes. A lot of this is happening in Ontario and this will also end up helping the workforce shortage.
Global Data reports that the Canada construction market was valued at $325.1 billion in 2021 and is expected to grow at an AAGR of more than 2% during the period 2023-2026.
The key sectors in Canada's construction market include:
- Commercial construction
- Industrial construction
- Infrastructure construction
- Energy and Utilities construction
- Institutional construction
- Residential construction
The key contractors in the Canada construction market are Fluor Corporation, SNC-Lavalin Group Inc., Aecon Group Inc., PCL Constructors Inc. Kiewit Corp., Bird Construction Inc., EllisDon Corporation, JGC Holdings Corp., Actividades de Construccion y Servicios SA, and Graham Group LTD.
CTV News states that the effects of inflation have permeated across the Canadian economy and the construction industry is no exception. According to Statistics Canada, the cost of construction for non-residential buildings, the year over year increase in costs has been 13 percent in the first quarter of 2022. These cost increases are putting serious pressure on the construction industry.
These cost increases are making projects too expensive. According to Chris Gower, chief operating officer of buildings for PCL Construction, this means that projects are being deferred or cancelled.
On top of that, the high price of fuel driven by the pandemic and Russia's invasion of Ukraine has also increased costs for shipping. That has pushed some construction companies to buy products locally.