Arcadis sees bright spots among Canada’s rising construction costs

Cover image courtesy Arcadis.

Consulting engineering firm Arcadis released its annual International Construction Costs Index this week. While its outlook for Canada includes an expectation of rising construction costs and dampened demand in certain sectors, the firm says there are also some ‘bright spots’ on the horizon.

In 2023, Canada’s gross domestic product (GDP) experienced its slowest growth rate (outside the pandemic) since 2016. While the index forecasts continued slow growth, as  near-cyclical high-interest rates temper investor sentiment, it also suggests Canada’s construction market remains resilient, with promising prospects in 2024.

The housing shortage, for example, remains a critical issue across Canada, driven by population growth and consumer demand. To address the shortfall, the federal government has allocated $6 billion to the Canada Housing Infrastructure Fund.

“Overall, the construction market in Canada is one of opportunity, with some sectors requiring a bit more caution and patience, notably residential,” says Audrey Jacob, Arcadis’ Toronto and business area director. “Looking ahead, the availability and capacity of skilled labour to participate in construction projects will be a growing constraint.”

Population growth also fuels demand for other projects. Notably, Canada’s largest infrastructure undertaking, the addition of 1,000 km of new track for high-speed rail services between Quebec City, Montreal, Ottawa and Toronto, is expected to advance with a contractor appointment this summer.

Canada’s industrial and manufacturing sectors, meanwhile, have been buoyed by onshoring trends and just-in-time delivery practices. Major projects, such as Dow’s US$6.5 billion net-zero petrochemical plant in Alberta and automotive manufacturing expansions, signal continued growth and investment.

“In a resource-constrained market, existing supply chains and delivery models might not be adequate to provide the assurance needed to protect multi-billion-dollar investments,” says Martijn Karrenbeld, Arcadis’ global director for industrial manufacturing. “This will place a premium on productivity-led design, procurement and construction to deliver projects at scale. Project teams need to be ready to adapt.”