Non-residential construction losing ground

Although non-residential construction continues to grow, the dollars invested are showing signs of decline.

By Source: Reed Construction Data February 11, 2009

Reed Construction Data reports that according to Statistics Canada , growth in non-residential construction is approaching the zero line, following the general decline in the North American economy.

Research indicates that investment in non-residential building construction in Canada increased by 1.7% in the final quarter of 2008. This rise follows a 1.5% increase in the third quarter. Compared to the previous year, the increase in investment was 8.0% in the fourth quarter and 7.1% in the third quarter. Institutional construction was up by 3.7%, followed by commercial, up 1.5%. Industrial project investment declined by 1%.

However, when put in inflation-adjusted terms, investment in non-residential building construction fell 1.2% fourth quarter, as a result of a decline in the volume of industrial (-4.0%) and commercial (-1.5%) construction. In the quarter, institutional construction was up by 1.4%.

Looking forward, the large volume of projects that are shovel-ready or currently underway, combined with the effect of stronger profit growth mid-way through 2008, should support non-residential building construction in the first half of the year. However, the report states that the support is likely to dissipate by mid-2009, due to the effects of declining industrial capacity use, retreating corporate profits, slowing growth of office-based employment, tightening lending conditions, and a drop in investor confidence.