COVID-19 has hurt the commercial and retail portions of the non-residential building universe, although the warehouse sector has benefited. Many workers are staying away from offices, and consumers have shifted a sizeable portion of their shopping to the internet where firms need fulfillment centres to fulfill orders. The current relative strength of these market segments is an important clue to their near-term construction prospects.
The permanence of these shifts remains to be seen. Work-from-home could be here to stay—at least in some form. The future could be the German model, where 75 per cent of workers have returned, but only half travel to their office five days a week. Our estimates suggest this could free up anywhere from 6.5 per cent to over 23 per cent of the current stock of office space in Canada’s major centres. Higher online shopping volumes are also becoming entrenched, and will likely persist after the pandemic has passed.
We expect a mixed recovery through year-end 2020 and into 2021. Our estimates place non-residential construction output above pre-COVID-19 levels in the third quarter of 2020, thanks to work resuming on many construction sites. This will set the stage for a decent 2021, although subsequent growth will be slow as the office and retail sectors remain soft.
Industry employment spiked in the first quarter of 2020, but pulled back near pre-COVID-19 levels in the spring. The third quarter saw resumed job growth as output rose. Employment will edge only modestly higher in 2021 and thereafter, however, due to reduced space requirements in office and retail markets and as developers confront ongoing skills shortages.
