Construction Outlook 2008
Jessica Krippendorf

Construction Outlook 2008 Ð Trowel It's smooth sailing ahead for the Canadian construction industry in 2008, with BC, Alberta and the industrial-commercial-institutional (ICI) sector leading the way. The provincial government's major inventory of projects, which tracks jobs over $20 million on the Lower Mainland and over $15 million in other regions of BC, is estimating $132 billion in investment between now and 2013, up from a projected $120 billion six months ago.

"It's encouraging," says Keith Sashaw, president of the Vancouver Regional Construction Association. "In the past there were pockets of activity where either the Lower Mainland was busy while the Interior was lagging or industrial was strong and commercial was not. Now there's very strong activity across the board in almost all regions."

Sashaw anticipates a strong year in every industry with continued growth in the ICI sector as well as strong signs of continued investment in private sectors.

"There's a bit of a moderation in the residential sector," he says, "but it's a minor dropping from the current high and it's expected to take off again in 2009."

A definite area of growth is in infrastructure construction, says BC Construction Association president, Manley Mclachlan. "We've got eight mines under consideration in the Prince George area for example, and it's going to take $4.5 billion in infrastructure just to get to them, never mind get them up and running." He also reports increased activity in the provincial oil and gas sector.

A strong year is expected nationally with the western provinces and Newfoundland a bit in the lead in non-residential sectors. Jeff Morrison, spokesperson for the Canadian Construction Association says manufacturing growth in Ontario is not as high, because of hits taken because of the dollar. "This is the only weaker point we see so far."

Though the residential sector in Ontario has lost some of its sustained growth from earlier in the decade, over the past couple of months residential housing starts are on a rebound. "A lot of formal forecasts for 2008 are seeing a weaker residential sector there," says Morrison, "but it is a sector that has tended to out perform the forecasts."

Across the country, growth in engineering construction, or infrastructure projects continues. Significant investment announcements at the federal level, such as a recent commitment of $40 million into a stretch of highway near Ottawa and a 16 percent upswing in provincial highway budgets act as green lights for optimism in this sector.

But, the booming market isn't without its hindrances as contractors scrambling to fill the industry's labour shortage are well aware of. Sashaw says the Construction Sector Council recently projected that, based on new activity, the industry will be requiring 20,000 new entrants to the sector over the next five to eight years and at least 25,000 to address the ageing work force. "This whole demographic challenge is one all sectors are facing, so contractors are going to be competing with other sectors to recruit," he says.

The industry and labour market appear to be responding to the shortage, with Statistics Canada recently reporting a fairly high number of new entrants to the sector. "The question is will it continue to do so?" asks Morrison.

Another response to the labour shortage seems to be the adoption of new technology. "The availability of skilled workers is going to drive exciting new innovations in technology," says Sashaw. "Some things that were cost prohibitive will be more affordable, and we see a greater use of technological aides and developments in that area of construction."

Whether it's the adoption of a cordless drill or productivity-enhancing software, the adoption of innovative or new technology has almost become part of the norm, says Mclachlan. "In today's heated environment the business case becomes more evident given the pressures that contractors are under."

While in the past it was said that when the US sneezes, the rest of the world catches a cold, Canada's construction professionals are, at least so far, enjoying some degree of immunity. "Obviously when the subprime crisis hit, our members raised concerns about what impact it would have on investors in the residential and commercial sectors," says Sashaw, "but there's been no sign of that to date. All indications are that we'll be able to weather through it."

He attributes this in part to continued investment activity from across Canada and the world including Asia, Europe and the US. Morrison agrees, but says that in response to recent projections of a slowing of the US economy due to the housing problem, the Bank of Canada reports fear that the Canadian economy may slow down too. "As a service industry, the construction sector might experience an indirect ripple effect," he says.

A developing trend for the coming year is the tendency toward the implementation of "fast track" deadlines under which contractors and even subtrades are often called in to a project at the barest beginning stages.

"The trend we're witnessing is one of owners trying utilize construction procurement methods and contract language that gives them some assurance that they can control the cost of a project," says Mclachlan, who warns against a possible significant impact on contractors.

"Whenever there's a variance in industry accepted standard processes, contractors run the risk of an imbalance of the allocation of risk and potential for inadvertently being misinformed about potential liability -- penalties attached to time frame, for example."

Sashaw says that because contractors are brought in earlier, they're required to be more versatile and, with the question of private sector investors, it puts greater onus on contractors to better market their companies to architects and owners. But he also sees it as an opportunity.

"It means contractors can be closer to the conceptual side of a building project. It's a real opportunity to bring value to a project through the recommendation of products, building types and practices that can help modify increases in costs."

Described by some as the biggest thing to sweep the industry since the safety movement of 30-40 years ago, green building is making huge headway in 2008. As contractors are brought into projects earlier, Sashaw says their input may assist in making the transition from traditional practices as smooth as possible.

"Contractors can bring more value to projects by providing first hand information about energy efficient products, design concepts, better waste management, LEED specifications, et cetera," he says .

As green building becomes the norm, contractors will have to adapt some business practices to include the adoption of a green build process, says Mclachlan. "I don't see it as being a major impediment as it becomes the norm and it represents a business advantage for our members."

The only concern at the national level is whether the green movement is coming too quick. "There are so many people jumping on board, do we have enough qualified people to do this work?" asks Morrison. "We're getting more people trained through courses, but we still have a lot of work to do to bring the industry up to that so they can take on any project that is tendered."

But if history is any indication, the construction industry, in which fluctuation and change are the norm, is sure to adapt and continue to move forward, at least for the interim.

"It's a great time to be in construction," says Sashaw. "We see the market continuing to grow for a couple of years, but the cycle will turn - that's the one thing we know about the construction cycle. The turn will probably be post-2010, but this will be more of a correction than a 'down to the bottom.'"

For detailed construction industry forecast and survey material visit the Construction Sector Council at . SMJ

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