Construction Declines, But Experts Predict Explosive Growth Long-Term

I’m hopeful that things will calm down in the new year, but the construction industry continues to face large increases in overall costs. Inflated price increases for steel, wood and almost every other construction item have taken a toll, as these new numbers show. 


Building construction investment in Canada continued to slow down in September, according to numbers from Statistics Canada. 


Total investments in the industry declined by 0.7 per cent in September for a total of $17.5 billion, showing that a downward trend that began in May continues to affect the market, StatCan data concluded. 


Residential construction investment decreased by 1.6 per cent in September, with Quebec responsible for the majority of the decrease. At the same time, StatCan data shows that investment in this area was still 21.6 per cent higher than in February 2020 — just before pandemic restrictions hit North America. 


StatCan also found that investment in single-family homes also slowed by about 0.6 per cent to $7 billion. Declines in this sector were reported in eight of the country’s provinces.


Construction investment for multi-unit buildings also decreased in seven provinces, the report said, which is nearly 3 per cent less than the national total of about $5.8 billion. 


In general, the difference in value between multi-unit and single-unit construction investment had been reduced over the past few years. Yet the gap has widened again during the pandemic. 


Despite these slight declines throughout the construction industry, there is reason for some optimism. The Canadian government has made big strides in investing in infrastructure, which should help the construction industry rebound pretty quickly. 


Since 2016, the federal government has invested more than $100 billion in 74,000+ projects aimed at strengthening the middle class, supporting the transition to a cleaner growth economy and improving social inclusion.


Over the last 12 years, the government has actually spent $180 billion on infrastructure, reported Insurance Business Canada, which also said that the global construction industry is poised for explosive growth as many countries around the world try to restart their economies following the pandemic-induced recession of the last two years.


That will likely mean big dollars allocated to big infrastructure projects, residential construction that attempts to meet the housing needs of growing populations, and energy projects that help meet the clean-energy goals.


“We’re going to see a massive uptick [in construction] nationally and internationally, with respect to infrastructure – and not just typical civil infrastructure, but you’ll also see it with respect to power asset protection or safeguarding, where countries are making those systems more robust to prevent failures,” Michael Pignataro, regional head of energy & construction for AGCS North America, told Insurance Business Canada. “You’ll see coastal and flood defences go up. You’ll see a more robust application for hospitals, airports, and things like that. So, it’s not just bridges, highways, tunnels, or things of that nature. It’s a more expansive capital spending.”


That brings certain risks to construction management, according to a recent Allianz Global Corporate & Specialty (AGCS) report, which said that the strong growth outlook for the construction sector is based on several different factors.


Those include rising populations, large-scale investment in renewable energy sources like wind, solar and hydrogen, and transmission and power storage systems.


As governments pump money into investment, the construction industry will have to learn to manage the complexities of building with unjustified price increases in materials as well as excessive permitting and development fees.


Hopefully those factors can be addressed as investment in infrastructure expands in the near future.

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