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According to Arcadis’ 2024 International Construction Costs Index, Canada’s construction landscape is set for a nuanced journey amid evolving market conditions.
High interest rates coupled with inflation dampened Canada’s construction market through 2023 but there are a few bright spots on the horizon in 2024.
While GDP rose by 1.1% in 2023 – the third consecutive year of growth – it was the slowest pace since 2016 and aligns with more traditional growth levels after a few years of significant rises. Slow growth is forecast for 2024 as interest rates at near cyclical highs curb investor sentiment, suggesting caution and tempered expectations.
“Overall, the construction market in Canada is one of opportunity with some sectors requiring a bit more caution and patience, notably residential. Looking ahead, the availability and capacity of skilled labor to participate in construction projects will be a growing constraint,” said Audrey Jacob Arcadis’ Business Area Director, Places, based in Toronto.
In construction markets, high rise residential is particularly challenged; downward movement in both the cost of borrowing and construction costs, which is anticipated later in 2024, is required to turn the tide materially. The housing shortfall is acute across most of the country. Federal immigration policies are fueling population growth and associated consumer demand. The federal government unveiled a new C$6 bn Canada Housing Infrastructure Fund, in recognition of the critical infrastructure required to address the country’s housing shortage. Continued population growth is also driving demand for healthcare and education related projects.
Investment in infrastructure is expanding, while workloads for industrial and manufacturing are resilient. Summer 2024 should see a contractor appointed to Canada’s largest infrastructure project – the addition of 1,000km of new rail track to provide high speed rail services between Quebec City, Montreal, Ottawa, and Toronto. Transit investment projects continue to emerge across the country.
Continued on-shoring and just-intime delivery is driving industrial facility demand. The industrial segment will be boosted by plans from US chemical firm Dow to build a US$6.5 billion net zero petrochemical plant in Alberta, with construction starting this year. Building on the C$7 billion VW project which commenced in 2023, various other auto manufacturers are considering expansions; reports suggest that Honda may build a US$13.8 billion electric vehicle plant in Ontario.
Featured image: The Gordie Howe International Bridge, currently under construction is scheduled to be completed in the Fall of 2025. (WDBA) |
