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 - Aug 06, 2010

Alex Carrick
It’s been 35 years since institutional construction starts as strong

Anyone who has any doubts about the level of government commitment to stimulus projects should simply take a look at CanaData’s institutional construction starts.

Through the first half of this year, institutional starts Canada-wide were +161% in square footage terms (+96% in dollar volume) versus the January to June period of last year. That’s 24.0 million square feet so far in 2010 versus 9.2 million in the same time frame a year ago.

The 24.0 million square feet in the first half is what one might normally expect in a full year. For nearly a decade, institutional starts have fluctuated around 25.0 million square feet annually.

CanaData is projecting that for the full year 2010, institutional starts will be close to 40.0 million square feet. That will make 2010 the strongest year in this category since – drum roll please – 1975. That’s 35 years ago.

The second half of this year is not likely to be as strong as the first for several reasons.

For starters, there was one extraordinary large project in Montreal that will probably not be matched in the remainder of this year. The project referred to is McGill University’s new mega medical centre, for which ground was broken in May.

This does overlook work at the University of Montreal that may add significantly to the numbers, although the timing seems uncertain.

Furthermore, there is the looming deadline for completion of government approved projects. This was the result of a deliberate effort to bring work forward when it was most needed to fill in the gap left by the withdrawal of private sector capital funding.

Federal, provincial and municipal projects need to be wrapped up in the first quarter next year.

This reduces the likelihood large projects will receive a go-ahead at this late date with the expectation money will be made available from the infrastructure stimulus wallet.

A valid question is what happens when the stimulus money runs out?

There will be a lull of a year or two when institutional starts go into hiatus. By 2012, demographic factors are sure to kick in again.

There is population growth to consider. Plus the aging population will require additions to medical facilities for decades to come. And the grandchildren of the baby boomers are accounting for a mini-baby-boom that will mean school construction at the primary level.

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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