Infrastructure is the future of construction in Canada, but it doesn’t come without demographic and funding challenges.
EDC Economics economist Todd Evans, ConstructConnect Canada president Mark Casaletto and BuildForce Canada economist Bob Collins gave their take to delegates at the Canadian Construction Association’s (CCA) International and Construction Economic Situation and Outlook session at the CCA’s annual conference held in Mexico recently.
A dominant theme of the conversation was the emergence of non-residential construction as a strong driver of the economy, particularly civil construction.
"This year, we’re forecasting a big jump," Casaletto said, citing total construction starts for 2017 expected to grow by 13.4 per cent, total civil engineering starts for 2017 forecast for 21.5 per cent growth and total non-residential expected to jump 17 per cent. "These are huge numbers, but I want to put an asterisk next to it," Casaletto said, explaining that while huge and long-term commitments to infrastructure are being made, activity is not starting as fast as it could.
Megaprojects have become a touchstone of the industry, he said, and between 2011 and 2014 average announcements for multi-billion projects skyrocketed, but in 2015 they cratered. The numbers for 2016 are above average due to big infrastructure commitments, but "it’s a bit of a pig in a python" as progress on these projects is slow.
Casaletto noted that the time may be near for talk of "teraprojects" and said willingness to speculate and investment confidence will have a significant impact in the next 24 months.
"There is over a trillion dollars in private money waiting to be invested and overall confidence will determine if that money moves into construction," Casaletto said.
While infrastructure spending varies across the country, British Columbia "really is the story of the country and has been for some time," he added.
A province’s ability to commit to infrastructure depends on a balanced budget and only B.C. and Nova Scotia are in prime positions to take advantage, Casaletto said.
He also noted that demographics, increased urbanization and the tendency of new immigrants to settle in major cities means there will be strain on current and aging infrastructure.
"The private sector will have a big part in infrastructure long term, because demographics will play a larger role," he said.
Collins agreed that demographics are a prime mover for the economy and said Canada faces long-term challenges such as slower population growth leading to less of a labour pool for construction, competition from other industries for those workers and a wave of retirements.
"Twenty per cent of the work force is expected to retire in the next decade, an estimated 248,000 construction workers," Collins said.
He noted that labour markets vary by region, with Ontario and British Columbia leading.
"Ontario is ‘the beast.’ There’s a lot of work in the Greater Toronto Area, but it takes a lot to move markets in Ontario due to its population size," Collins said.
British Columbia has major LNG, pipelines, utilities, mining, transportation and other infrastructure, but Collins cautioned these projects will peak by 2019.
In Alberta there are still projects being maintained, which lessens turnover. But there is very little new capital investment in the oil and gas sector and much of the labour that will be or has been released is from out of province,
"But soon the downturn will affect numbers in house," Collins said.
Evans took a more global view and said the recent trade agreement between Canada and Europe shows promise, though Brexit is cause for concern. China is another area with potential, Evans said, since it has shifted to a more domestically driven economy, presenting opportunities for Canadian exporters.
"Seeing what’s happened with China, we should keep an eye on India, as they are going down the same path," Evans said.