CanaData forecasts steady rise in construction activity after 2010

Alex Carrick, chief economist for CanaData and Reed Construction Data, gave an online mid-year construction forecast via a webinar on June 18. This was the first time the company has given a mid-year forecast and it proved popular. Carrick spoke to a capacity audience over the internet.

“The economy is in a pickle,” he said in his general remarks, but pointed out that Canada was late entering the world-wide recession and has benefited from that.

He said that while this year all the talk is of deflation and the problems it can cause (e.g. difficulty for companies to pay back debt; consumers holding back, and low interest rates), in a year and a half the problem will be inflation because of all the debt governments have taken on around the world.

The economic recession has been unlike anything we’ve seen before, he suggested. Canada has lost 350,000 jobs. Still compared to the U.S. we’re in fairly good shape. In that country since January 2006 until the present, housing prices dropped 80%. At one point there was a year’s worth of unsold houses on the market, he said, saying that all the builders could have gone home for a year. “It’s almost unbelievable,” said Carrick, adding that the U.S. collapse was bound to have an effect on Canada.

However, Carrick said oil prices will rise back up to $70 a barrel, and since Canada is now  “petrocurrency,” the Canadian dollar will move in tandem with rising oil prices.

He also says “green shoots” showing, such as increased demand for commodities in China, which suggest the overall economy could start growing again. 

At any rate, the forecasts Carrick presented for different construction sectors were generally optimistic.

In his table for All New Construction (current $ millions), he forecast $210.6 million for 2009 (lower than $214.2 million in 2007 and $230.4 million in 2008). After 2009, the numbers start rising again to $222.9 million in 2010 (+5.8%), and $244.3 million (+9.6%) in 2011.

New Engineering Construction was forecast to rise from a low in 2009 of $86.8 million, to $94.6 million in 2010, and $103.7 million in 2011. The largest figure in this group was for Alberta, with 32.2 million in 2009, rising to 36.8 million in 2011.

The Total Non-Residential Building (institutional, commercial, industrial/ICI) construction start forecast showed the following trend:  2009 – 50 million sq.ft.; 2010 –  58.5 million sq.ft.;  2011 – 68.5 million sq.ft. (In comparison, total ICI was over 100 million sq.ft. in 2000, Carrick pointed out.)  The provinces are all forecasted to show approximately the same gradual rise.

Office Building starts, measured in square footage, are forecast to rise from 4.4 million sq.ft. in 2009, to 5.6 million sq.ft. in 2010, and 7.5 million sq.ft. in 2011.

Retail and Mall construction starts and industrial building starts show a similar trend.

Medical building construction starts are forecast to level off in the next three years, however, from 9.0 million sq.ft. in 2009, to 9.2 million sq.ft. next year, and then down to 8.8 million sq.ft. in 2011. Despite this trend, Carrick pointed out that the population reaching the 65 to 84 year old age group (the primary population for hospital usage) is set to rise sharply in 2010 and remain rising until 2020.

On the other end of the age range, the projected group of 20-24 year olds needing university and college buildings will decline sharply after 2014. For now, education building construction starts are forecast at 11.4 million sq.ft., 11.7 million sq.ft. and 11.2 million sq. ft. for the next three years, compared to approximately 10.0 million sq.ft. for 2007 and 2008.

More details of the forecast, slides and an audio file are available from Reed Construction News at:

http://event.on24.com/event/14/73/33/rt/1/documents/slidepdf/final_presentation.pdf

The webinar was sponsored by 4Refuel.