BuildingTeam Construction Forecast

Mann at Work

Reed Construction Data editor Denise Mann gathers North American construction-related economic announcements from around the Web and summarizes them just for BuildingTeam Forecast readers. Your feedback and suggestions for future topics to be covered are always welcome.

Monday, September 24, 2007

Canada Will Weather the U.S. Economic Storm

Sep 24 2007 6:44AM | Permalink | Email this | Comments (0) |
Blog This! using: | |

I attended the CanaData Construction Industry Forecasts Conference on September 20, and I have to say the mood among the economists and delegates was definitely upbeat and positive.

Here’s a summary of some of the highlights of the conference.

Canadian-United States Dollar Parity
About half way through the day, in a feat of fortuitous timing, RCD Canada’s managing director Mark Casaletto announced to those assembled at lunch that the Canadian dollar had just reached parity with the U.S. dollar. With so many representatives of Canada’s leading building products manufacturers in the room, it is probably safe to say that the news was met with guarded enthusiasm by a few and stony silence by many.

The Canadian Economy Takes a Different Path
Although the words “subprime,” “credit crunch” and “dollar parity” were frequently mentioned — and top of mind for many — the experts seemed to agree that Canada is in a good position to weather the potentially devastating storm stirring up trouble in the United States.

Speaking to Canada’s construction industry leaders, Dr. Warren Jestin, Senior Vice-President and Chief Economist, Scotiabank, led off the morning sessions by stating that the “main street impact of the sub-prime crisis has a very long tail, and you’ll be hearing about it for a while.”

In light of the turbulence and threat of recession in the U.S., Jestin predicted two more quarter-point decreases in the Federal Funds Rate in the coming months, hard on the heels of the September 18th half-point reduction. However, Jestin said that he doesn’t see the Bank of Canada following the Fed’s lead.

In fact, Jestin predicted that Canada is headed on a very different path from the U.S. He credits three factors for this: the country’s resource-rich economy, hefty government surpluses and large numbers of householders in good financial shape.

All of these factors make Canada attractive to global investors, and greater investment means more construction opportunities.

Residential Construction
With the Web full of news stories about homebuilders auctioning off large blocks of new homes, it comes as no surprise to hear whispered fears that the tail end of the financial hurricane might sweep into the Canadian market.

But economists and experts at the CanaData conference were optimistic that Canadian residential construction will remain above 200,000 units for at least the next three years. In fact, economist Will Dunning, of Will Dunning Inc., said that the amount of recent Canadian employment growth alone makes him “confident” about the residential housing market.

Non-Residential Construction
In the U.S., the non-residential construction market has not been affected by the sub-prime crisis. According to Reed Construction Data economist Jim Haughey, “the non-residential construction market has, so far, felt little negative impact from the spillover of the subprime mortgage mess into the rest of the economy.”

In his article entitled Near Record High Non-Residential Construction Starts in July, Haughey forecasts that starts will stay high but are unlikely to rise much above the current level.

Although the Canadian non-residential sector hasn’t seen the gains posted in the U.S., CanaData chief economist Alex Carrick said that total non-residential starts have had a “very strong year” and will begin to pick up even more momentum in 2008.

Carrick explained that the coffers of the federal government — and most provincial governments, too — are full. “Governments have a lot of money right now,” said Carrick, “so expect to see more institutional and heavy engineering projects announced, with starts in 2008 and 2009.”

As for commercial construction, Carrick pointed out that there are three markets in Canada that are particularly positive for new commercial construction: the Greater Toronto Area, Vancouver and Calgary.

In the office-building sector, Paul Morse, Sr. Vice-President, General Manager and National Practice Director for Cushman & Wakefield Lepage, had good news for conference delegates. “We’re in the early stages of an office development boom,” said Morse, “and vacancy rates are as low as they’ve been in 22 years.” In fact, said Morse, the sub-prime crisis, credit crunch and the subsequent rate cut have made the environment better for real estate investment trusts (REITs) and other large borrowers.

Next Year’s Conference
In short, the 2007 CanaData Construction Industry Forecasts Conference was filled with insights and intelligence, all aimed at helping construction industry leaders plan for the future. For more information on next year’s conference, to be held September 28, 2008, check for updates as the date draws nearer.

Reader Comments

Post a comment

RCD Tool Center
RCD Links
Project Information
Building Product Info
Regional Publications
Other Products
Please visit these other Reed Business sites