July 16, 2008

British Columbia sees decline in non-residential construction investment

Richard Gilbert

staff writer

Investment in non-residential building construction fell in Canada during the second quarter of 2008. British Columbia saw the largest decline of any province.

According to a report released by Statistics Canada on July 14, investment in non-residential building construction reached $10.5 billion between April and June.

It is up from $10.4 billion between January and March. Spending on medical facilities and office buildings accounted for a large share of the increase.

“Rising construction prices contributed significantly to a .9 per cent increase in current dollars in investment in non-residential building construction in the second quarter of 2008,” said the report.

“However, after taking into account higher construction prices, investment in non-residential construction declined 3.7 per cent in 2002 constant dollars.”

This means that once the current dollar value of investment in non-residential building construction is adjusted to take inflation into account, there is an actual decline in activity.

“For us, we are interested in the trend,” said Philip Hochstein, president of the Independent Contractors and Businesses Association (ICBA).

“Things can go up and down for a month, but when they go down for two months or more, we are concerned.”

Hochstein explained that B.C. is coming off record years of growth, so there is no need to panic.

“We are just coming back to a normal market,” he said. “We are making comparisons with non-normal times.”

The head of the British Columbia Construction Association (BCCA) also said he believes it is important to understand how to use these figures.

“When making comparisons using estimates based on building permits, one major project can skew the results,” said Manley McLachlan, president of the BCCA.

His members have noticed a slowing of the market in northern B.C. and Victoria, he said.

The biggest decline in the current dollar value of investment in non-residential construction occurred in B.C., which fell by 5.1 per cent to $1.3 billion in the second quarter of 2008 from $1.4 billion in the first quarter.

The decline, which would be even higher if inflation was removed from the estimates, is the result of lower spending on commercial, institutional and industrial projects.

These projects were started in 2006 and early 2007 and are now almost completed.

The largest drop of any metropolitan area in Canada was experienced by Vancouver, which dropped 7.7 per cent from $858 million to $792 million.

According to Hochstein, members of the ICBA have seen signs of a slowdown in the industry.

“We have noticed that there are more bidders for jobs and subcontractors are calling general contractors looking for work,” he said.

“In our industry, these are early warning signs. The statistics are now catching up to insider warning signs.”

Hochstein said he believes the market in B.C. is still strong, but this could be an indication that economic conditions are shifting.

“At this point however the industry remains busy with lots of projects to bid on, but we are going to be watching closely,” he said.

When inflation is included in the Stats Can estimates, investment in commercial construction increases by 0.8 per cent to $6.5 billion.

Industrial construction increases by 1.6 per cent to $1.5 billion, and in institutional construction edges up one per cent to $2.6 billion.

Print | Email | Comment