February 22, 2005

Ontario Construction Secretariat forecast

Ontario ICI construction to reach $10B for 2005

By Grant Cameron

staff writer

Construction activity is expected to pick up slightly in the industrial, commercial, institutional (ICI) sector but lag on the residential side, a meeting of construction employers and labour leaders was told last week.

ICI construction in Ontario is expected to reach $10 billion this year, up $300,000 or 3.1 per cent from the figure for 2004.

Next year, ICI construction is expected to increase another 1.1 per cent to $10.1 billion in Ontario.

Meanwhile, forecasters anticipate the number of housing starts in Ontario will decline to 74,500 this year, from 83,600 in 2004.

The figures, compiled by the Ontario Construction Secretariat (OCS), were presented at the 5th annual state of the industry and outlook conference in Toronto sponsored by the Ontario Construction Secretariat.

Katherine Jacobs, director of research and analysis at the OCS, told the audience that although the number of residential starts will likely slow, overall construction activity remains very strong in Ontario.

A report by Jacobs at the meeting showed that construction activity has been healthy in Ontario with the residential sector leading the way.

Residential building intentions reached $15.2 billion in 2004, up 6.6 per cent from 2003.

The ICI sector has also grown at a steady pace, figures show, and the total value of intentions has now exceeded the previous peak reached in 1989.

Institutional activity has accounted for the majority of ICI construction growth in recent years, and softer growth should not come as a surprise given the somewhat tighter fiscal conditions, the report said.

Commercial activity has been recovering thanks to renewed strength in domestic and global economic conditions, the report said, but future activity in the industrial sector could be hampered by the risks of an overinflated Canadian dollar and higher energy prices.

According to the report, Ontario’s total construction labour force reached 297,000 workers in 2004.

The report contained a detailed analysis of the province’s five regions:

In the Greater Toronto Area, which accounts for close to half of all construction in the province, the report noted that nonresidential activity has been recovering at a sold pace but there has been limited growth in the ICI sector due mainly to the weak commercial market.

Renewed growth in commercial intentions should contribute to increased activity and the industrial sector should also pick up as the U.S. economy continues to improve, the report said.

In Central Ontario, the report said construction activity should continue to grow with a sustained level of activity expected in the industrial building sector and several new projects expected in the institutional sector.

In Eastern Ontario, the report said much of the activity has been driven by the Ottawa-Gatineau region with significant growth in the public administration sector driving residential construction.

Although ICI intentions came down slightly over the last two years, the report noted that project activity in the institutional sector indicates continued strength over the next year and, as the technology sector rebounds, stronger commercial growth is also expected.

In Southwestern Ontario, the report said there has been robust building intentions over the past several years and upcoming project activity indicates that the industrial sector is poised to improve in the coming year.

The report noted that commercial intentions have been growing steadily and the institutional sector has been the driving force for ICI construction.

In Northern Ontario, the report said residential permits have not returned to levels experienced in the late 1980s but ICI intentions have been on the rise since 1996, mainly attributed to a strong institutional sector.

The report noted healthy institutional activity is expected in the coming year.

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