Canada’s construction sector navigating challenges

(Image courtesy of Arcadis)

Despite struggles to make headway in 2023, Canada’s construction market remains resilient, with promising prospects on the horizon for certain segments in 2024, reports Arcadis in its 2024 International Construction Costs Index. According to the company’s latest findings, Canada’s construction landscape is set for a nuanced journey amid evolving market conditions.

In 2023, Canada experienced modest economic growth, with GDP rising by 1.1 per cent, marking a third consecutive year of expansion. While growth is good, the rate was the slowest since 2016, aside from the pandemic year, underscoring the challenges faced by the construction industry.

Although Toronto, Vancouver, Calgary and Montreal are all now within the top 50 most expensive places to build globally, Canada’s construction sector is poised for cautious optimism in 2024, with several bright spots on the horizon. The report forecasts continued slow growth as near-cyclical high-interest rates temper investor sentiment and moderate expectations.

The housing shortage remains a critical issue across Canada, driven by federal immigration policies fuelling population growth and consumer demand. To address this shortfall, the federal government has allocated $6 billion to the Canada Housing Infrastructure Fund, underscoring the urgency of investing in critical infrastructure.

Population growth also fuels demand in healthcare, education, and infrastructure projects. Significant investments are underway to address those segments. Notably, Canada’s largest infrastructure project, the addition of 1,000 kilometres of new rail track for high-speed rail services between Quebec City, Montreal, Ottawa and Toronto, is expected to advance with a contractor appointment slated for summer 2024.

Furthermore, Canada’s industrial and manufacturing sectors are demonstrating resilience, buoyed by onshoring trends and just-in-time delivery practices that are driving major industrial construction projects like Dow’s US$6.5 billion net zero petrochemical plant in Alberta and auto-related manufacturing plants elsewhere in the country.

“Overall, the construction market in Canada is one of opportunity with some sectors requiring a bit more caution and patience, notably residential,” stated Audrey Jacob, city executive for Toronto and business area director, places, at Arcadis. “Looking ahead, the availability and capacity of skilled labour to participate in construction projects will be a growing constraint.”

“The key priority for clients is delivering an operational facility on time, but in a resource-constrained market, existing supply chains and delivery models might not be adequate to provide the assurance needed to protect multi-billion investments,” added Martijn Karrenbeld, global director for industrial manufacturing at Arcadis. “This will place a premium on productivity-led design, procurement, and construction to deliver projects at scale – and project teams need to be ready to adapt.”

The 2024 Arcadis International Construction Costs Index is a look at 100 major cities worldwide, providing insights into the global construction landscape. The full report can be downloaded here.

www.arcadis.com