Expectations For The 2021 Canadian Construction Industry

Canada's construction industry took a dip in 2020 due to the coronavirus pandemic but should rebound in 2021 if a vaccine is widely distributed and holds the crisis in check.

The country's gross domestic product should also bounce back from a 5.6% loss to a growth of 4.1% to 4.9% in 2021.

While specific sectors, including airports, hotels and hospitality, and brick-and-mortar retail, will be slower to recover, others are in better shape. Multifamily residential, engineering and roadwork and industrial will show the strongest upticks.

Construction navigated a tough year, though strict safety protocols at worksites allowed jobs to continue in most locations.

Surpassing pre-2020 construction activity levels will depend on how robust the economic recovery is and the vaccine's success.

Construction starts, overall, are projected to rebound from 2020's $60 billion to some $80 billion in 2021. For now, the outlook for all segments is promising.

Expect infrastructure and renewables to be top-performing sectors due to expected government stimulus spending and some large construction projects in Quebec, British Columbia, and Ontario. Those wins should counter declines in the leisure and commercial sectors. Canada's Growth Plan has committed an extra $10 billion for building retrofits, broadband, renewables, electric charging stations, and agricultural irrigation.

 The spring lock-down led to a late surge in the residential sector. However, there is some uncertainty about its long-term sustainability due to a drop in immigration and foreign investment.

While Canada saw 341,000 cross the border in 2019, that number plummeted to 200,000 in 2020. The government has since set targets of more than 400,000 for 2021 and 2022 to sustain the real estate bubble. Expect housing starts to rise to between 211,000 and 213,000 in 2021, compared to 172,000-213,000 in 2020.

The low-interest-rate will likely depress cost escalation for construction, though a moderate increase is expected in Ontario, British Columbia, and Quebec. Manitoba, Alberta, Saskatchewan, and Atlantic Canada will see the low-cost escalation.

A low inflation rate, the country's recession, and more competitive bidding will also help keep cost escalation to a minimum.

Diversify Relationships for Efficiency

Public-private partnerships will likely pick up with the new year as a way to work more efficiently. The purpose behind such partnerships is to achieve more "value for money" for taxpayers. It is a demonstrated method of using resources more efficiently and exceeding service delivery goals while protecting the public interest.

There are now more than 200 public-private partnerships in Canada, with 38 more projects under construction and 29 in pre-construction phases. The projects include work in the transportation, education, and health care sectors.

The private sector is often more efficient in design, operation, and maintenance, and building. As a result, the most significant benefit of public-private partnerships is that increased efficiency. It is also a win for the construction industry because it opens up more opportunities, including infrastructure projects.

Since private partners in such an arrangement shoulder much of the project risk in exchange for a return, the government gets a guarantee of economic efficiency as it works to serve the public interest.

Canada has also developed construction management systems that will continue to promote more collaboration between partners. Government agencies are more willing to delegate infrastructure to the private sector when cost and schedule benefits are significant. This has led the United States to look at developing better risk assessment and allocation techniques, piloting earlier contractor involvement, conducting pre-proposal meetings and considering alternative payment methods.

Construction Industry Growing

Canada's construction sector employs approximately 1.2 million people or 7% of the nation's workforce. That number reflects a 50% increase in jobs compared to the previous decade. Immigration is fueling Canada's growing economy and population, but with that comes a need for more infrastructure and housing. That is good news for the construction industry, expecting strong growth in the coming years.

Major projects totaling $100 billion are now breaking ground, including Bellchassee Transport Center in Montreal, Calgary's Complex Continuing Care Facility and the Brampton Transit facility. Alberta and Canada's governments have committed more than $52.7 million for completing several infrastructure projects underway through the Canada Infrastructure Program.

Investments will continue. The Community Infrastructure Improvement Fund has earmarked $150 million to improve and repair infrastructure across Canada. TC Energy is committing $8 billion for a transport project that will carry 830,000 barrels of oil each day from Alberta to Nebraska.

Labor an Ongoing Issue

With so much going on in Canada, the one thing that is not happening fast enough is the entrance of more skilled workers to help with the many construction projects expected over the next decade.

A new report from BuildForce Canada, a government-funded agency that provides labor market statistics, states that the construction industry in Ontario will face a massive shortage of skilled laborers since more than one in five workers currently in construction will reach retirement age.

Already, many construction projects are short of the skill they need.

The time is now to plan for this shortage. There is a need for some 110,000 new workers by 2024. The combination of major projects and a worker shortage is not a good one. Recruiting, training, and hiring must remain a priority. Transit and nuclear refurbishment will help sustain high levels of employment.

By 2024, Canada expects to record a Compound Annual Growth Rate of 8.5%. With that, the construction sector will be worth $354.9 billion in U.S. dollars. As the building sector picks up and reengages projects the COVID-19 pandemic put on hold, 2021 should be a year for healthy growth. Few projects were completely canceled due to the health crisis, which should lead to a swift recovery.

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