CanaData’s latest square-footage starts forecasts for six major non-residential building sub-categories are set out in the graphs that accompany this report. Privately-funded new construction starts are currently “flat as a pancake.” This is primarily hitting the commercial and industrial type-of-structure categories. In the meantime, public sector work is going ahead as part of federal and provincial government stimulus packages. In CanaData’s Top 10 starts reports, institutional and engineering projects have made up 45 of the 50 largest jobs since April. The net effect will be to produce some deep troughs in sub-sector commercial work, but less severe declines in key institutional categories.

However, some slight shift in the outlook may be taking place. Employment in the services sector in Canada is holding up better than expected. It is the reason that Canada is performing stronger on the jobs front than the U.S. Year-over-year service sector employment in Canada was +0.5% in August of this year, versus -2.6% in the U.S. This has implications for office building and retail construction, once recovery gets underway.

Hotels and Offices

Hotel and motel construction is depressed now and likely to remain weak for some time. Many new hotels are designed 50% condo and it is that market that is experiencing a particular fall-off in demand, more so than for single-family properties. Existing home sales have been remarkably good and mortgage rates are at record lows. These factors may provide a boost to new housing starts, and by extension, hotels. However, hotels will still suffer from the drop in U.S. visitors to Canada. This has resulted from the new passport requirements for U.S. citizens to return to their homeland. This is captured in the -5.7% figure for accommodation and food services employment year over year in August.

Office vacancy rates have risen in the recession, but not by excessive amounts in most major centres. Office employment has stayed strong. Year-over-year finance, insurance and real estate employment was +3.3% in August. In professional, scientific and technical services, it was +1.4%, and in information, culture and recreation, +5.4%.

Retail and Warehouse Work

Retail construction hangs tough in the bad times. People have a basic need to shop. There are some purchase items that cannot be put off. This category of work may bounce back sooner and to a greater degree than most of the other privately-financed categories of construction. Warehouse work has been laid low by the fall-off in manufacturing activity. This is a category that will likely continue to struggle. Manufacturing activity will be held back by the appreciating value of the loonie versus the greenback.

Medical and Educational

In the medical and educational categories of construction, government money is maintaining activity levels. This is a holding pattern versus the steep declines that are being experienced elsewhere. Longer-term, there will be a need for spending on facilities to care for an aging population and to retrain and upgrade the skills and education levels of workers needing to compete in a tough international environment. To fund this work, it will be easier once the recession is out of the way and tax revenues pick up.