Ottawa, July 22, 2019—The Conference Board of Canada’s Economist Robyn Gibbard offers the following insights on today's release of Investment in Building Construction figures for May 2019:
“Non-residential building construction has grown strongly over the last year, buoyed by very low industrial and commercial vacancy rates in Vancouver and Toronto. With vacancy rates remaining quite low, especially in the industrial sector, we should see building construction remain strong. All of this is great news for business investment this year.”
- Spending on non-residential building construction grew by 5.5 per cent in the past 12 months
- Growth was driven by strong commercial building construction. Spending on commercial buildings in May increased by11.7 per cent compared to the same period last year.
- Spending on industrial buildings also grew strongly and was 5.9 per cent higher than the previous year.
- The lone dark spot was institutional building construction, which was down 7.4 per cent year-on-year. This category measures construction projects like university buildings, government buildings, and hospitals.
- Overall, investment in buildings has grown at a much faster pace than the economy as a whole over the past 12 months.
- Because all of the recent growth has come from the private sector, these figures bode well for business investment this year. In our latest Canadian Outlook forecast [link], we project that non-residential building construction will grow by 4.7 per cent in 2019.
- Non-residential building investment fell from 2014 to 2016, but since 2017 it has been growing very strongly. With the latest monthly data release, that upward trend continues.
- The Canada-wide office vacancy rate is 11.3 per cent according to the latest data from CBRE. But the headline number conceals dramatic regional differences. The vacancy rate in Calgary is 24.4 per cent, whereas in Vancouver it is 4.3 per cent and in Toronto it is 7.4 per cent. Much of the growth we have seen has come in those two cities. With vacancy rates still relatively low in those cities, demand for commercial construction should continue to be strong
- The Canada-wide industrial vacancy rate is just 3.1 per cent according to CBRE, with vacancy rates as low as 1.5 per cent in Toronto and 2.1 per cent in Vancouver. With vacancy rates so low across the country, we should see large demand for new industrial building activity for some time.