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Canada's September year-to-date construction starts up strongly in almost all categories

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Alex Carrick

Positions:
Alex Carrick is Chief Economist for CanaData, Reed Construction Data’s Canadian economic forecasting and statistical service.

Economists

Total construction starts in Canada were +62% in square footage and +55% in dollar volume terms through September of this year versus the first three quarters of last year, according to CanaData, the forecasting and statistical arm of Reed Construction Data Canada.

Total construction starts in Canada were +62% in square footage and +55% in dollar volume terms through September of this year versus the first three quarters of last year, according to CanaData, the forecasting and statistical arm of Reed Construction Data Canada. Residential starts have been approximately two-thirds higher this year to date in both square footage and dollars. CanaData’s single-family starts in units are tied to numbers released by Canada Mortgage and Housing Corporation (CMHC). Then average square footage and dollars-per-square-feet adjustment factors are applied. As for CanaData’s multi-unit starts statistics, those are built up from projects researched by RCD’s own staff members. An end to record-low interest rates, a tighter mortgage approvals process and less buoyant overall economic growth, with implications for home-buying confidence, will see Canadian housing starts dip to 175,000 units or slightly lower in 2011 from 180,000 units this year. In April 2010, they crossed back over 200,000 units, but they’ve been on a gradual slide ever since. By 2012, national housing starts should by on a cyclical path upward again. Year-to-date commercial starts in September were +22% in square footage and +31% in dollars. Public sector stimulus money has played a role, with recreational buildings +44% in square footage and government office buildings +43%. But the private sector hasn’t been completely shut out. Starts on retail and wholesale services construction was +19%. Furthermore, this category has accounted for the most square footage among all commercial types of structure. Commercial starts in 2010 will approach 30.0 million square feet, after recording a level of only 25.2 million in 2009. An improvement in the private sector/developer spending cycle will move them up to 35.0 million in 2011 and 45-plus million in 2012. Institutional starts are +87% in square footage and +73% in dollars. This is one of the two categories (along with engineering/civil work) that have come to the forefront over the past year and a half thanks to major government infrastructure spending commitments. The square footage of institutional work is nearly three times as high as last year in hospitals and medical/welfare work. In the equally important educational buildings category, starts are 52% higher so far this year versus the same time frame last year. Institutional starts may reach as high as 40.0 million square feet this year. If they do, they will be at their highest level since the 1970s. The federal government’s one-third spending commitment to specially-approved projects expires on March 31, 2011. Many institutional and engineering projects have been brought forward to beat that deadline. Consequently, it is only logical to suppose that 2011 and 2012 will see a rather sharp drop in institutional construction starts. CanaData is forecasting those years at 22.5 million and 25.0 million square feet respectively. Demographic factors will require that a certain floor level of institutional work be initiated regardless. Industrial construction has been the one category that has faltered badly this year, down 11% in square footage and only a fraction of what it was last year in dollars. Manufactured export sales have been held back by ongoing weakness in the U.S. economy, plus a Canadian dollar that has been flirting with U.S. dollar parity for some time. Profits being realized by corporations are going into machinery and equipment rather than new plant. In a positive development, however, capacity utilization rates are climbing again in many key industries, auguring well for a return of stronger facilities investment beginning in 2011 and picking up steam in 2012. Engineering construction starts, which are only ever expressed in dollars, were +79% year to date in September when compared with the same period last year. Re-instatement of a major Oil Sands project in Alberta contributed mightily to the gain. With the world price of oil now back above $80.00 USD per barrel, more such work will be showing up in the construction pipeline. The switchover from public sector financing of projects to private sector backing will be very important if engineering construction is to maintain its momentum. It will also likely mean a shift away from transit-oriented projects to more initiatives grounded in the resource sector. For September/'s Top 10 starts list and the trend graph, please click here. Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.

by Alex Carrick last update:Oct 14, 2010

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