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Non-residential construction set to bounce back

Friday, April 6, 2018

Non-residential construction could be set for a modest turnaround in 2018, new predictions have revealed.

However, investment levels still won’t reach the heights hit in 2014, according to Michael Burt, director, Industrial Economic Trends at The Conference Board of Canada.

“Non-residential construction is expected to bounce back this year, following a contraction in 2017,” he said.

“However, business investment levels are expected to remain below their 2014 peaks, which will lower growth opportunities for non-residential construction going forward.”

The Conference Board’s latest outlook predicts a rebound in 2018 for the non-residential construction industry, following two years of contractions. However, it warns that weak business investment intentions are limiting prospects.

Pre-tax profits in the sector are expected to rise by 8 per cent to reach $2.3 billion this year, while the industry is expected to grow by 1.9 per cent this year.

The value of new non-residential building permits increased by an estimated 15 per cent last year to reach $35 billion, indicating a healthy number of projects in the pipeline.

Growth in e-commerce continues to drive demand for more warehouse space.

In combination with several new mining projects and planned plant expansions, this will support growth in the industrial segment, the Conference Board advised.

The institutional segment will be supported by federal government infrastructure spending on new community centres and recreation facilities. Additionally, provincial infrastructure spending on schools and hospitals will continue to support the industry.

Meanwhile, after posting its strongest growth since 2013 last year, Canada’s residential construction industry is forecast to see a small contraction in 2018.

“Spending on new housing and renovations will likely slow this year as Canadians become more cautious under new mortgage rules and interest rate increases,” Burt explained. “This will put downward pressure on new residential construction.”

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