Skip to Content
View site list


Pre-Bid Projects

Pre-Bid Projects

Click here to see Canada’s most comprehensive listing of projects in conceptual and planning stages


Interest rates to play major role in influencing market conditions: T&T

Angela Gismondi
Interest rates to play major role in influencing market conditions: T&T

After confronting supply chain disruptions, high rates of inflation and a tight labour market last year, a new report from global construction consulting firm Turner & Townsend expects 2023 to be just as challenging with interest rates dominating market conditions.

“We said that 2022 was going be a challenging year for ongoing labour constraints. I don’t think anyone quite anticipated the quantum of interest hikes that came about in 2022 but we definitely thought last year that the industry would be buoyant and that proved to be the case,” said Darren Cash, director of cost management with Turner & Townsend.

A slowdown is expected in the residential sector and the public and commercial sectors are also expected to moderate.

“We’re definitely anticipating a slow down,” said Cash. “It may not necessarily be a contraction, but definitely the rate of growth will slow down as people look at their projects in a much more focused lens.

“We’re expecting it to be still a fairly buoyant industry,” he added. “Spending should continue, assuming we don’t have more significant interest rate hikes. I think the Bank of Canada have indicated that they’re going put a pause on it for a period of time, which they haven’t defined.”

Released at the end of January, the 2023 Annual Canadian Construction Market Intelligence Report, provides an overall market analysis and sector insights.

“Particularly in the residential sector, a lot of projects have not necessarily been cancelled but are definitely on the slowdown whilst developers look at their pro formas to see if they work,” he noted. “There is a general consensus that private residential will slow down as the pinch of the interest rates for purchasers starts to take hold.”

Across the country, Quebec, Ontario, British Columbia, Alberta are all spending billions of dollars on large infrastructure projects, he added.

“Public sector spend doesn’t seem to be stopping anytime soon,” he noted.

Natural resources are also very strong as is the push towards net-zero.

“Commercial office space is still in a state of flux,” said Cash. “Some are saying, ‘you can work remote for the rest of your life if you want to.’ Other industries are saying, ‘no, we need that collaboration. We need that at least two, three days a week,’ so the real estate strategies of the big pension funds, big banks remains in a state of flux.”

The report also provides a breakdown by region. B.C. has historically been very active in the residential market, Cash said, but that’s starting to slow down as there is a shift towards more natural resource-type projects in the northern part of the province. Alberta has been very heavy on natural resources historically.

“They’ve had a big push now on conversion of empty office buildings into residential to try and get that heated part of the market to cool down a little bit,” said Cash.

The outlook for Ontario will depend on a couple of things.

“It will depend on the migration out of Toronto to the 905 regions and what that means in totality for the residential sector,” said Cash. “There was a lot of spending in the institutional side, a lot of investment provincially going towards a net-zero City of Toronto, a big program there for their own buildings and their own fleet, and then obviously the infrastructure spend that the Ontario government has come out with. Ottawa continues to be strong with federal government spending on their own offices…That will continue on for the next 10 or 15 years.”

There is also a big public sector spend coming up in Quebec and Atlantic Canada is also booming.

“It’s on fire, very busy, very active, lots of people migrating from the big cities out east because quality of life is better out there,” Cash explained. “It’s becoming attractive to foreign investors with the way that they’re offering tax breaks or incentives…for high tech and manufacturing clients.”

All provinces across the country are “hot” right now, he added.

“For the first time in a while, you got most provinces quite hot versus, historically, if one province was up, the other province was down,” said Cash. “We’ve got a balance now, which is causing some of the supply issues.”

The report also includes a cost guide, providing a benchmark of new construction, which is measured in Canadian dollars per square foot, for different sectors including residential, commercial, retail, education, health care, government and public buildings, industrial manufacturing and high technology and others.

The report also includes thought leadership on three different areas: Natural Resources — LiDAR technology in natural resources; Net-zero — Addressing net-zero targets on Public Private Partnership contracts; and Project controls — Achieving an integrated approach to new contracting models.

For more on the report click here.

Follow the author on Twitter @DCN_Angela.

Recent Comments

Your comment will appear after review by the site.

You might also like