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January 20, 2014

Report finds Canada is a leader in stable construction

Construction workloads will remain stable in 2014 as major energy, resource, infrastructure and commercial projects will counterbalance reduced residential activity, concludes BTY Group's Market Intelligence Report for the fourth quarter of 2013.

“We’re seeing Canada as being the leader in the provision of stable construction,” said Darren Cash, senior cost consultant at BTY Group.

“The Canadian influence in North America generally is increasing, the macro economic conditions of Canada are making it be a very attractive country for people to come in and invest in.

“When you add into the mix the resources that are in abundance in Saskatchewan and Alberta, our thoughts are that 2014, moving into 2015, Canada is a pretty good bet to carry on.”

Canadians have completed more than 200 domestic public-private partnership (P3) projects over the last decade and that expertise is becoming more in demand across the border as support for P3s gains momentum in the United States.

Currently, 33 states and Puerto Rico have enacted statutes that enable the use of various P3 approaches for the development of transportation infrastructure.

Complex P3s attracted large multinational construction firms to the Canadian marketplace after the global financial crisis.

The Market Intelligence Report noted that these firms have started acquiring domestic construction firms, building relationships with contractors and trades and bidding on and winning conventionally procured projects.

Cash believes healthy competition is good for the marketplace, for instance the real Gross Domestic Product (GDP) of Ontario is expected to grow around the two and a half per cent mark.

“With the amount of projects they have, the only way they can do that is by getting the best and the most eager contractors to work to the best of their abilities,” he said.

“It’s going to mean the inflation escalation over the next couple of years is probably going to be a little more manageable.”

Ontario is expected to out-pace overall growth in Canada in 2014 for the first time in a decade.

Improving business investment and trade will spur more non-residential construction, especially in mining and energy. Sustained infrastructure investment, a strong commercial sector and steady new residential building will help keep construction levels stable.

Strong demand for labour in mining and related projects in Northern Ontario is expected to exceed the local workforce in 2014.

That demand will shift to the Greater Toronto Area in 2015 as the area heats up in transportation and electricity, including generation and transmission projects, as work ramps up for the refurbishment and construction of nuclear power facilities.

Strong shipbuilding and commercial construction, and healthy in-migration that sustains residential activity, will keep British Columbia humming as massive liquefied natural gas (LNG) and hydro projects get underway and propel the province to solid long-term growth.

Continued strong oilsands investment, flood reconstruction, record high in-migration and a commercial building boom will help sustain Alberta’s robust construction activity and drive Canada’s strongest residential growth.

Sustained investment in resource and energy development and continued high levels of in-migration will see Saskatchewan keep its place as a growth leader — with strains on labour supply.

Continuing investment in transportation and health care infrastructure and multibillion-dollar mining and energy projects will help Quebec regain momentum.

Utilities, mining, oil and gas, and manufacturing are expected to lead Manitoba’s growth in 2014, with anticipated stronger economic expansion in the U.S. promising to increase the province’s exports, stated the report.

Atlantic Canada saw a record $115 billion in investment in some 388 projects in 2013.

The investments, which represented a 12 per cent increase over 2012, will help fuel strong construction activity across much of the region. Spending on major projects in Atlantic Canada in 2013 grew by five per cent to a record $14.3 billion.

More of the same can be expected for 2014, said BTY.

With construction investments across the country, comes the need for a mobile skilled workforce, noted the report.

Though labour is critical, some areas of the country do not necessarily want outside help, said Cash.

“It’s inevitable that they have to get it. Which is good, everyone is going to start sharing their best practice ideas with everybody else and I think it can only benefit Canada’s economy in the long-run,” he said.

Cost savings are also being seen as a result of the Charbonneau Commission’s ongoing inquiry into corruption and collusion in Quebec’s construction industry, the report concluded. The provincial government has put new regulations and legislation in place to curb abuse.

One new set of rules has resulted in $240 million taken off of road contracts for the first 10 months of 2013, according to Quebec’s Minister of Transportation, Sylvain Gaudreault.

Tougher regulations for contracts for building and maintaining roads and bridges in the province have seen costs drop 16 per cent below estimated costs projected for 2013.

The provincial government is also preparing a bill that would create the Quebec Transportation Agency, which will develop internal expertise for strengthened monitoring of contracts for road construction and maintenance in the province.

The government has already hired more than 100 engineers this year in order to help build the Ministry’s internal expertise, noted the report. BTY expects Canada will be one of the hottest markets for building in the short term, medium term and long-term.

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