Building Magazine


Evidence is mounting that the oil price drop will negatively affect Canadian construction

The drop in oil prices is continuing to have a major effect on construction in Canada, according to the latest Canadian Construction Market Survey, conducted by the Royal Institution of Chartered Surveyors (RICS). As a result of the price decline, overall Canadian construction output is expected to be two percent lower than it would have been if not for the oil drop, based on survey responses. RICS conducts this sentiment survey of Canadian construction professionals quarterly.

The effect is being felt most strongly so far in the oil, gas and energy sector, with 68 per cent of respondents reporting that the price decline has been responsible for cancellation of projects in those areas, and nearly 90 per cent believing that workloads will be further reduced over the coming year. And the regional trend from the previous quarter continues, with Ontario expected to see the strongest investment in construction in coming years and the Prairies’ expected construction fortunes continuing to fall with the price of oil.

“The survey highlights the significant impact the major shift in oil price has had on the respondents’ sentiment and outlook for 2015,” said Marlon Bray, Director, Cost Consulting & Project Management, Altus Group. “Alberta is bearing the largest brunt of the downturn with reduced expenditures and a likely decline in tender price expectations. While construction output is predicted to be lower across Canada, Ontario remains in an optimistic position with continuing investment in the residential, commercial and infrastructure sectors.”

An Alberta government official expanded on the effect of the oil price drop on his province. “Any activities connected to the oil sands are taking a real hit,” the official said. “There’s a lot of news regarding larger oil companies, including multinationals like Total, that previously expressed interest in investing in oil sands but are now putting projects on hold, and this is showing across Alberta. There are still a fair amount of commercial and residential projects in progress but the industrial sector is definitely taking a hit,” the official continued. “And government infrastructure projects are still proceeding, but cautiously.” 

As for factors limiting future growth, financial pressures and competition from rivals remain the most important – nearly 60 per cent of respondents cite both as concerns – with planning and regulatory constraints and weather coming in next. And a third of those asked were affected by labor shortages, especially in securing surveying and other construction professionals.

As for the longer-term outlook, respondents expect both workloads and the job outlook to improve over the next 12 months, though with less confidence than in the previous quarter.

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