Construction spending expected to rebound this year with Ontario gaining momentum, report says

Ontario Construction News staff writer

Consultants at BTY Group say construction activity could pick up across the country this year amid anticipated spending on infrastructure and renewable energy.

The international consulting firm says it predicts construction costs will rise three per cent to five per cent in 2021 for Ontario, British Columbia, and Quebec, with lower spending levels in Alberta and Manitoba amid new restrictions from the COVID-19 pandemic.

“Construction is on the upswing,” the report declares. “Construction is set to continue to out-perform most sectors as it has done through the pandemic.”

Despite a decline of 8.5 per cent in 2020, prospects are much brighter after the first few months of 2021 and for the two years following.

Ontario will regain momentum in 2021 with capital spending investment expected to rise by eight per cent in 2020, with more funds pledged to municipalities. Ongoing and proposed projects drive activity in healthcare, transit, and utilities. Multiple LRT projects (Eglinton, Hurontario, and Finch) lead in the GTA, with the Ottawa LRT and redevelopment of Centre Block the high-profile projects in eastern Ontario.

In the southwest the Bruce Power refurbishment, the Gordie Howe Bridge and the Nova Chemical plant will help keep activity levels high. The residential sector is expected to settle back in 2021 after a surprising surge in the latter half of 2020 due to pent up demand following the spring lockdown.

A steep reduction in in-migration is expected to damper overall demand by the end of 2021, while demand for housing in the suburbs will continue as remote working becomes a viable long-term option. Stronger housing demand is also expected in the potential 18-hour cities – mid-size cities with appealing amenities, a lower cost of living and doing business than larger urban areas and higherthan-average population growth.

Non-residential construction projected to dip by 2.9% in 2020 but forecast to rebound in 2021 as the provincial economy recovers. Warehousing and fulfillment centres are leading industrial development with COVID-19 accelerating the already growing move to eCommerce.

Question marks hang over growth in new office and retail sector construction as they grapple with uncertainty over the continuation of remote working and relentless expansion of online shopping.

The value of overall construction starts in Canada is projected to rebound from $60 billion in 2020 to $80 billion this year. The outlook is positive for all segments, with industrial, residential – especially multifamily – and engineering and roadwork having the sharpest upticks.

Office and retail will have flatter growth trajectories and skilled trades availability poses a continuing challenge.

Meanwhile, BTY estimates that construction costs in Saskatchewan and Atlantic Canada could be flat or rise up to two per cent, as low interest rates offset rising oil and lumber prices.

Infrastructure investment can play a key role in supporting overall recovery, the report says.

“The federal and most provincial governments are making significant increases in infrastructure spending. The federal government’s Growth Plan has committed an extra $10 billion for renewables, broadband, building retrofits, agricultural irrigation, and EV charging stations. Private and pension investment is also increasingly supporting infrastructure development.”

The consultancy says there is uncertainty around home construction, given this year’s drop in immigration and foreign investment during the pandemic.

But BTY’s report also says government stimulus spending could help the construction industry find its footing next year.

BTY pointed to the federal government’s growth plan, which calls for a $10 billion investment in renewable energy, broadband infrastructure, building retrofits, agriculture irrigation and electric vehicle charging stations.