The latest Market Intelligence Report issued by global consultancy BTY Group suggests that as Ontario’s economy rebounds from the COVID-19 pandemic, construction costs could rise by as much as 5 percent.

BTY Global issues its Market Intelligence Report annually. This year’s report for Canada suggests a solid outlook for the construction industry, albeit one that will vary among provinces, and according to each region’s ability to contain the spread of the novel coronavirus.

Infrastructure, renewable energy and industrial building are forecast to be the top performing sectors, with mega projects in BC, Quebec and Ontario counterbalancing declines in commercial and leisure sectors. Investment in renewable energy is the bright spot in Alberta, which, like most provinces, is also increasing investment in infrastructure to boost the economies.

Meanwhile, although the residential forecast grew strongly in late 2020, uncertainty remains about longer-term expansion given the sharp drop in immigration and reduced foreign direct investment due to the pandemic.

“The construction industry’s ability to rally after pandemic lockdowns and return to work safely reflects the resilience and adaptability it has shown through past crises and economic downturns,” says BTY Group managing director Toby Mallinder. “In the longer term, we are expecting changes driven by COVID-19—especially in technology—to improve productivity. Achieving and surpassing pre-2020 construction activity levels still depends on a robust economic recovery supported by a speedy, successful and sustained vaccine rollout.”

Nationally, the report suggests that construction will outperform most of the rest of the economy—as it has throughout the pandemic. The report projects a sectoral decline of 8.5 percent in 2020, but much stronger performances between 2021 and 2023.

The value of construction starts is projected to rebound from $60 billion in 2020 to $80 billion in 2021. The outlook is positive for all segments, with industrial, residential—especially multi-family—and engineering and roadwork having the sharpest upticks. Office and retail will have flatter growth trajectories.

Driving construction prices will be increases in the cost of lumber and oil, as well as reduced supplies of skilled workers and foreign goods, and costs for COVID-19 protection. Low interest rates and more competitive bidding will help to counterbalance those factors, but not enough to offset increases.

Ontario growth driven by public sector

The report suggests that Ontario’s GDP will grow by 5.6 percent in 2021 before pulling back to 4.1 percent in 2022. Helping to drive growth will be a strong recovery in employment, as well as a robust government spending program. Indeed, the federal and provincial stimulus programs will rise by 8 percent in 2020, with more money allocated to municipalities to help balance strained budgets.

Key construction projects across the province include the Eglinton, Hurontario and Finch light rail projects in the Toronto area, the light rail and Centre Block redevelopment projects in Ottawa, as well as the Bruce Power refurbishment, the Gordie Howe Bridge and the Nova Chemical plant.

Ontario’s residential sector is expected to settle back in 2021 after a surge in the latter half of 2020 due to pent up demand following the spring lockdown. A steep reduction in in-migration is expected to damper overall demand by the end of 2021, while demand for housing in the suburbs will continue as remote working becomes a viable long-term option.

Finally, non-residential construction is projected to dip by 2.9 percent in 2020 but forecast to rebound in 2021 as the provincial economy recovers. Warehousing and fulfillment centres are leading industrial development with COVID-19 accelerating the already growing move to eCommerce.

Question marks hang over growth in new office and retail sector construction as they grapple with uncertainty over the continuation of remote working and relentless expansion of online shopping.