Reed Construction Data-CanaData updates its square footage forecasts for the major non-residential building categories of construction every second month. Non-residential building, also known as ICI work, is comprised of the industrial, commercial and institutional categories. The 2009 total ICI forecast, based on actual starts in the first half of this year and an assessment of market prospects, has been revised down from 50.0 million square feet, as called for in May, to 47.5 million now. The net change is the result of commercial starts being marked up slightly and institutional and industrial being cut.

Commercial Construction Forecast

Commercial starts in Atlantic Canada have held up much better than expected so far this year. In fact, the Atlantic is the only region in Canada to record a year-over-year increase in commercial starts versus the January to June period of 2008. Ontario is also doing relatively okay. The commercial square footage drop in that province is large, -35%, but it is less than for most other provinces. Saskatchewan (-36%) has also experienced a drop similar to Ontario’s. The Canada-wide comercial square footage decline is -57%.

The 2009 commercial square footage forecast now stands at 22.5 million, up from 21.0 million as set in May. The 2010 level is now expected to be 30.0 million, as cyclical recovery beginning in the fall will restore some investment spending next year. In 2011, a signficantly better economy will raise commercial starts to 39.0 million square feet.

Institutional Outlook

The 2009 institutional forecast has been revised down to 22.5 million square feet from 25.0 in May. This is a bit of a disappointment. Publicly-financed institutional work is supposed to be the saving grace in the overall non-res building construction market. The fact that institutional work is being brought forward is evident in CanaData’s Top 10 list of project starts over the last three months. Another way to look at the revised forecast is to understand that this will leave institutional starts only slightly lower than last year. In the other non-res building categories, the declines versus last year are by more than half.

Industrial Work

The final category to consider is industrial work. This is truly in the depths of despair. It appears that total industrial starts this year will be only 2.5 million square feet. The manufacturing sector is being hit hard in terms of weak product demand and difficult export markets. The latter results from both the more-virulent recession in the U.S. and the fact that the Canadian dollar has been climbing in value versus the greenback of late.

This is another sector, like commercial, where there will be cyclical recovery in 2010 and 2011. However, one has to be cautious about becoming too optimistic about the prospects for industrial construction. The long-term trend has been for manufacturing jobs to leave richer countries like Canada and take up residence in lower-cost emerging nations. 

The four tables below show the regional actual and forecast figures, 2007 through 2011, for the major types of non-residential building (ICI) construction.