Panelists: Bumpy economic road ahead for Canadian construction industry but the longer-range picture is positive

Ontario Construction News staff writer

The Canadian construction industry will have some challenging times in the next couple of years as it grapples with sometimes contradictory challenges of higher interest rates, inflation, labour shortages and supply disruptions.

However, speakers at a Thursday panel discussion about the industry’s economic outlook in a post-COVID world at the Buildings Show expressed generally optimistic perspectives in part because of the industry’s ability to recalibrate to different environments and incorporate technological changes to increase productivity and speed up project delivery.

Considering the environment, “I would say the sector has construction sector has done well,” said Monique Buckberger, vice-president and district manager, PCL Constructors Canada.

“There’s definitely market sections within overall construction that have been (negatively) impacted, where others are doing quite well. So infrastructure spending is a good example whether it’s healthcare spending, transit, transportation, there’s a large commitment from the government to keep that spending.

“Where we see some of the softening is in the market uncertainty,” Buckberger said. “So with office space, we’re looking at office vacancy rates over 10 per cent, which is unusual, when the normal (rate is) seven per cent. So there’s definitely market sectors that have provided a balance between some some that are void and others that are there.”

Panel moderator John Mollenhauer, president and Chief Operating Officer of the Toronto Construction Association (TCA), observed that there has been “ridiculous growth” in the GTA high rise sector. “We have 229 tower cranes in Toronto, which just in round numbers is 50 per cent of every tower crane in North America but I just wonder whether that busy market on the residential side is sustainable.”

Prices are skyrocketing as higher interest rates put a crimp on financing, and owners are putting new projects on hold to wait for the market rebalance, indicated Jeff Murva, president, J. Murva Consulting Ltd., which acts as an owners’ representative especially in the GTA marketplace.

Despite this caution, the absolute volume of work outstanding at present is still very high, he said. The length or lifespan (from conception to completion) of high rise residential projects can be seven years, “so it helps span things like pandemics,” he said.

“The challenge that we’ve got these days is as we continue to price and procure work, there’s still lots of volume out there,” Murva said. “There’s a lot of attrition on bidders lists. One can establish a bidders list and ensure that everybody made their bid. And when it finally comes down to the bid closing date, there could be 40% attrition, because we’re all so busy.

“The demand is still there. It’s a very strong commitments for building high rise residential.” Price escalation is a real problem, with large projects – repriced to consider the current environment – still coming in, in two cases, at 13 and 19 per cent over budget.

The speakers suggested there are different challenges and business pressures depending on the location and type of construction. Currently, things are booming for example on the East and West Coasts, and infrastructure and public works backlogs are growing, as the market shows signs of slowing in residential and office construction areas.

Labour shortages are a real problem. Buckberger for example, observed that in her experience contractors could find workers from other regions in Canada when things got busy in southern Ontario, but now every part of the nation is experiencing labour shortages. The pandemic added to pressure as many people decided to leave the workforce. Costs – in time and money – to commute to downtown Toronto have made the situation especially challenging locally, another speaker said.

The panelists indicated that technological advances could help alleviate some of the concerns, especially modular building or kits of parts and assembly materials that can be easily assembled on job sites. Initiatives to encourage more people to take on construction careers so far haven’t had a dramatic impact, however.


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