This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

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Construction Industry Forecasts

Notes from Alex Carrick - Dec 29, 2010

Alex Carrick
2010 review and 2011 outlook for Canadian non-residential construction starts

According to CanaData – the forecasting and statistics-gathering arm of Reed Construction Data-Canada – non-residential building starts nation-wide are at a pace to reach 74.0 million square feet in this current year, 2010. That’s compared with only 50.3 million square feet in 2009.

In other words, the level of non-residential building starts in 2010 will nearly match 2008’s 75.8 million square feet. The most recent peak occurred in 2007 at 92.1 million square feet.

Most of the gain in 2010 has come from institutional work, with a slight helping hand from commercial. Institutional starts in 2010 will rise to their highest annual level since the 1970s.

Institutional starts are projected at 42.5 million square feet in 2010. That’s nearly as much as 2009 (23.1) and 2008 (23.5) combined. Government infrastructure stimulus projects have played major roles, but so have ground-breakings on three major hospital projects in Quebec.

Those three mega medical facility projects have been: (1) a new state-of-the-art medical centre at McGill University in Montreal (4.2 million square feet); (2) Centre hospitalier CHUM also in Montreal (2.4 million square feet); and (3) L’Hotel Dieu de Quebec (2.8 million square feet).

Due to a large number of institutional projects being brought forward in 2010, the institutional category is expected to see an easing in new project initiations to 21.0 million square feet in 2011. They will return to a more normal level again of around 23.0 million square feet in 2012.

Commercial construction will record nearly 30.0 million square feet of starts in 2010. In 2009, the level was 25.3 million. In 2008, national commercial construction starts were 46.0 million square feet and in 2007, 58.0 million. The latter was the most recent cyclical peak.

Among commercial sub-categories, two of the three largest percentage gains resulted from a generous public purse: government office buildings (+79%) and recreational buildings (+37%). Only retail and wholesale service starts (+31%) excelled among privately-initiated work.

Beginning in 2011, private sector financing will tentatively and slowly return to the marketplace to supplant the decline in spending from the public sector. Relatively normal cyclical pick-ups will raise commercial project starts to 36.5 million square feet in 2011 and 47.0 million in 2012.

Industrial construction starts all but disappeared in 2010 at 2.0 million square feet. As firms become more accustomed to the Canadian dollar at parity with the greenback and manufacturers assume ownership of their niche markets, 2011 and 2012 will see cyclical recovery to 4.5 million and 6.0 million square feet respectively. Some mega aluminum smelter expansions will help.

Engineering starts as measured by dollar volume will end 2010 up by about one-quarter versus 2009. The $8 billion start on Imperial Oil’s Kearl Oil Sands project in May gave this category a huge leg up. More such mega heavy oil projects in Alberta are expected in the year ahead.

As a spur to investment plans, the world price of oil has broken through the $90 USD per barrel barrier. It may not be long until oil tests its next major threshold level, $100 USD per barrel.

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.


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