Canada market intelligence: mixed market messages

Economic overview: monetary policy constraints bear down on Canada’s growth prospects 

We are currently seeing a shift in Canada’s economic outlook. While the first quarter of 2023 showed resolute growth, a continued high interest rate environment has drawn down on consumer spending levels and housing investments are shallowing out.

As a result, second quarter growth has flatlined. With confidence taking a knock, the remainder of the year may well exhibit sluggish growth as Canada’s economic resolve is tested. 

The construction market, which revelled in post-pandemic demand, has also cooled slightly. This change in activity level is largely driven by the residential market, where interest rates, mortgage costs and affordability are now showing their impact.

Provincial highlights: the bigger picture 

British Columbia has seen a further slowdown in its real estate market. Building permits and construction investment have fallen by 1.8 and 4.3 percent respectively on the quarter as of Q2 2023.

Unlike many other moderating provincial construction sectors, Alberta seems to be going against the trend and has been displaying relatively bright market conditions. Building permits of both residential and non-residential construction have improved on the quarter, growing by 4.7 and 9.9 percent respectively in Q2 2023. This resulted in a 6.6 percent quarterly increase in total building permits.

Ontario’s construction market has softened over the past three months. Residential activity is suffering - impacted by the current high interest rate environment - yet non-residential work remains resilient. Infrastructure spending is robust and should position itself as a bright spot.

In Quebec, industrial construction investment, increased by 7.8 percent on the quarter in Q2 2023 and has grown without interruption since Q1 2021. Industrial and manufacturing projects overall seem to be resilient, with more opportunities coming though in science, technology, pharmaceuticals and data centres, albeit at a rate down on previous growth.

Alliancing for the future

There is a noticeable trend in the Canadian and global markets to move away from the traditional Public-Private Partnership (P3) delivery model, with its fixed pricing, to becoming more open to alternative management models, such as alliancing strategies.

In the report, Senior Consultants Priya Marwaha and Waleed Farooq discuss the importance of cost assurance in alliance contracting models in major infrastructure projects that are inherently complex and often involve significant uncertainty.