CanaData’s square footage forecasts are re-examined every second month. The latest analysis of the 2009 market justifies some downward revisions in the commercial and industrial categories. The institutional figure has been shifted slightly upward. As for the total of the three non-residential building (ICI) categories − industrial, commercial and institutional − it is now expected that ground will be broken on 50.0 million square feet. In the prior forecast in March, 2009 total Canada ICI starts were set at 54.0 million square feet.

Some Perspective on the Starts

By way of comparison, the square footage of ICI starts in 2008 was 72.1 million. The most recent cyclical peak came two years ago, in 2007, at 92.1 million. Prior to that, one has to go back to around the turn of the century, 1998 through 2001, for total ICI starts to be as high. It has to be remembered that in that earlier time frame, industrial starts were much higher, sometimes exceeding 20.0 million square feet. In recent years, industial starts have shifted into a phase of structural decline as manufacturing jobs and related capital spending are moving to low-labour-cost producers in emerging nations.

Three Distinct Market Segments

The latest forecasts are in keeping with the pattern of actual starts through April of this year. The overall construction market is breaking down in three primary ways as follows.

(1) Residential construction is downshifting after exceptional strength from 2002 through 2008. National housing starts this year are expected to be 150,000 units versus 211,000 last year.

(2) Privately-financed non-residential building work (i.e., in the commercial and industrial categories) and in engineering construction (i.e., oil and gas work) has gone into deep decline. Weak product demand, falling corporate profits and tight credit are the culprits. In the energy sector, the drop in the world price of oil from July 2008 to February 2009 caused myriad projects to be put on hold. The recent elevation in the price of oil back above $60 USD per barrel will see this sector gradually pick up.

And (3) publicly-funded work in non-res building (i.e., schools and hospitals in the institutional category) and the civil engineering field (i.e, sewer and water treatment plants; roads, highways and bridges; and utility projects) are holding their own versus last year. Further along in 2009, they are set for an improvement, once all of the government money is flowing that has been promised in various budgets and infrastructure renewal plans.

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