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Infrastructure projects will buoy construction industry in 2021

by Neil Sharma on 04 Jan 2021

Construction costs in Canada’s three most populous provinces are slated to rise 3-5% in 2021, according to BTY Group’s annual Market Intelligence Report (MIR), with planned infrastructure projects driving the increases.

“An already robust infrastructure program—bolstered by increased government stimulus spending—will help offset sharp declines in commercial building and a projected dip in housing starts,” said the international consultancy group’s 17th annual MIR.

“Infrastructure, renewable energy and industrial building are forecast to be the top performing sectors, with mega projects in B.C., Quebec and Ontario counterbalancing declines in commercial and leisure sectors. Investment in renewable energy is the bright spot in Alberta, which, like most provinces, is also increasing investment in infrastructure to boost the economies.”

Capital spending investments increased by 8% in Ontario in 2020, much of which was driven by transit projects. Three big LRT developments are on the go in the Greater Toronto Area, and another large-scale one is being developed in Ottawa. Although BTY projected a decrease in non-residential construction in 2020, it’s slated to rebound in tandem with the provincial economy this year.

Non-residential construction increased nearly 7% in B.C. last year, despite the lockdowns, with the massive LNG Kitimat project leading the way. Major projects, including pipelines and the SkyTrain extension on Broadway in Vancouver, will ensure elevated activity for the next few years. Moreover, on the heels of a late summer announcement that it was funding 11 clean energy infrastructure projects, British Columbia revealed this month that it’s investing $5.3 million in seven other green energy projects. The province already has a slew of liquefied natural gas projects underway in its northern region.

Quebec’s non-residential construction sector is expected to return to pre-pandemic levels soon, driven by major government-funded transportation projects. However, the MIR noted that, despite having one of Canada’s strongest real estate markets, the province’s residential sector could sputter into 2021 with fewer housing starts.

All in all, Canada’s construction industry has fared well in 2020, rallying quickly in the wake of pandemic-induced lockdowns. But sustained success, says BTY’s report, is contingent upon an efficacious vaccine.

“In the longer term, we are expecting changes driven by COVID-19—especially in technology—to accelerate improved productivity,” said Toby Mallinder, BTY’s managing director. “Achieving—and surpassing—pre-2020 construction activity levels still depends on a robust economic recovery supported by a speedy, successful and sustained vaccine rollout.”

The COVID-19 pandemic did indeed imperil some planned infrastructure projects. According to the Residential and Civil Construction Alliance of Ontario (RCCAO), the pandemic put pressure on MUSH (municipalities, universities and colleges, school boards and hospitals) budgets, and many within the sector responded by either cancelling or deferring crucial investment in infrastructure maintenance. The RCCAO argued that such cancellations would delay Ontario’s economic recovery.

Fortunately, with help from the feds, the provincial government stepped in with financial relief for municipalities grappling with budget shortfalls.

“This funding comes at a crucial time for municipalities across Ontario and we commend the leadership and cooperation shown by both the provincial and federal governments in working together to address this unprecedented economic crisis,” said RCCAO board chair Peter Smith. “As a result of this funding, municipalities can now begin putting their financial houses in order.”

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