According to the Conference Board of Canada, economic growth in the Greater Toronto Area is expected to moderate in 2019 and 2020.

In its latest Metropolitan Outlook document for the city, the board predicts the GTA’s economic growth rate to slow from 2.3 percent in 2018 to 2.0 and 2.2 percent in 2019 and 2020 respectively. This comes on the heels of average annual gains of more than 3 percent between 2014 and 2017.

The adjusted growth rate is due to a number of factors, including a manufacturing sector that has failed to benefit from a low Canadian dollar, slower growth in the retail sector, stronger output in the finance, insurance and real-estate sector, and the first pull-back in construction output in more than a decade.

Construction to contract by 3.2 percent

Toronto’s construction industry has a history of fluctuations. Where output increased by nearly 9 percent in 2015, it shrunk to just 1.5 percent in 2016. It grew again in 2017 before expanding only very slightly in 2018. The Conference Board’s forecast for 2019 is a contraction of 3.2 percent—the industry’s worst showing since 2008. The good news is, the industry will rebound. Analysts predict growth rates of 3.2 and 3.0 percent in 2020 and 2021 respectively.

Low investment levels in the region’s residential sector are to blame for this year’s weakened output. GTA housing starts dropped by 36 percent in the first quarter of 2019, and are on track to fall to about 34,500 by year’s end. This represents a significant pull back from 2018’s total of more than 41,100 units, but remains on par with the region’s ten-year average of around 36,000 units. The Conference Board expects housing demand to recover in 2020 with a growth rate of around 2.7 percent.

The non-residential sector, on the other hand, remains strong and vibrant. Work continues on such projects as the 25‐station Eglinton Crosstown light‐rail transit line (completion in 2021), the $685‐million Centre for Addiction and Mental Health Phase 1C development project (completion spring 2020), the Michael Garron Hospital (completion 2024), and the West Park Healthcare Centre (completion 2023).

Demand for office space in the GTA is also significantly high. Construction continues on such notable projects as the $2‐billion, 2.7‐million‐square‐foot CIBC Square, the mixed-use The Well development, the 32‐floor, 820,000‐square‐foot Bay Adelaide North Tower, as well as office towers owned by Cadillac Fairview, Oxford Properties Group, and the new head office of the Ontario Teachers’ Pension Plan.

Services output to expand

Growth in the region’s services sector is expected to remain steady at a rate of 2.5 percent this year and 2.2 percent next. This, after the sector recorded rates of 3.3 percent annually between 2014 and 2017, and 2.7 percent in 2018.

A number of factors are helping to keep these figures strong. The transportation and warehousing sector, for example, is expected to grow by 3.9 percent in 2019. Passenger volumes at Toronto Pearson International Airport remain high, and Purolator has declared its intention to invest $1 billion in Canada over the next five years. That figure includes spending of $330 million to open a 430,000‐square‐foot national hub in Toronto, and the grand opening of the company’s $8.5‐million, 110,000‐square-foot terminal in North York earlier this year.

The outlook for the GTA’s education sector is less positive. Where the sector enjoyed growth of 3.8 percent in 2018, it is expected to pull back to just 1.6 percent in 2019 and 1.4 percent in 2020. Projections for the local health care sector are similar. That sector is expected to cool off from growth of 4.8 percent in 2018 to just 2.9 percent in 2019. Retail too, is expected to climb down from a high mark of 8.6 percent in 2017 to just 2.0 percent this year.

Finally, the news is positive for Toronto’s professional services sector, which is expected to grow by 4.1 percent in 2019 and 2.2 percent in 2020. The Conference Board points to massive expansion plans by Shopify in the GTA (the company plans to double its employee base by 2022), as well as a planned spend of $500 million to occupy space at the Well development. Other investments are also forecast from Uber and Salesforce.