September 7, 2010

Non-resisdential construction profits to hit five-year low: report

OTTAWA

Non-residential construction investment increased in the second quarter of 2010, after declining for five consecutive quarters. Despite the uptick in activity, industry profits will fall to a five-year low in 2010, according to a Conference Board of Canada report.

“Although the industry finally saw gains in the second quarter, spending on commercial and industrial space will be down this year compared to 2009,” said Michael Burt, associate director of industrial economic trends for the conference board.

“High vacancy rates are limiting growth. In addition, the institutional segment, which has been the industry’s main source of growth over the past 18 months, is expected to weaken as government stimulus spending comes to an end.”

Spending on non-residential construction is not expected to return to pre-recession levels before 2012. Growth in demand will remain too weak to offset the effects of large declines in investment at the end of 2009 and earlier this year. Falling prices also continue to detract from industry revenues.

As a result, pre-tax profits are expected to fall to a five-year low of $1.2 billion in 2010. Improving market conditions will allow profit growth to resume in 2011, but industry profits are not expected to return to their pre-recession levels before 2014.

DCN News Services

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