Construction permits in Ontario

Tighten up your toolbelts, guys, ‘cause times may be getting a bit thinner!
One of the best ways to cope through the upcoming few months may be with “all-salad diets”, as one of my previous classmates jokes about being on right now. He has worn two toolbelts at once in the past, but he may find that he has to tighten them both up in the times ahead. Well, he may be okay, actually, but the province, on the whole, isn’t doing quite so good right now.

Alex Carrick, the Chief Economist at REED Construction Data recently conducted a small interview on Daily Commercial News, where he stated that private, non-residential construction starts in Canada have sunk rapidly in first quarter this year. He also mentioned that with corporate profits declining, he sees very little improvement in new investments until the first quarter next year. As a closing comment, he passed the ball off to the public sector, suggesting that based on the lack of private sector profits, they won’t be in a hurry to invest until the economy, and their profits, pick up, even through they have received tax cuts to continue over the next 4 years. Through the entire year, Carrick states that there is only 54 million square feet of non-residential building starts forecasted for this year; the lowest start since 1970. It will be up to infrastructure spending plans to hold up the building economy, and how fast they can get their projects started.

Looking at StatCan, a recent survey (published on Monday, April 6th) shows that the value of building permits fell from $4.39 billion to $3.7 billion in February, with the largest decreases in the non-residential sector in Ontario, where the value of building permits fell from $2.3 billion to $1.6 billion. Looking at the chart StatCan provided in their article, last year February it was at about $5.6 billion, February 2007 AND 2006 it was at about $4.8 billion. So this year has definitely hit a trough, but what does long-term history look like (over the last quarter century?) Well, employment in general in Canada hasn’t gone very well either. October 2008 was our last peak, but since then, the country has seen job losses over 357,000 jobs. The article itself stated that this has been the largest decline in a five-month period since 1982. That would give us a good look at the fact that 25 years ago it was EXACTLY this bad.

Where has this decrease come from? Well, mostly in Ontario and Alberta all across the board, but this post is focusing on construction. (… one guy in my formwork course therefore may have traveled provinces straight from the frying pan right into the fire!) These decreases came specifically in the areas of medical buildings, and educational institutions where the permit value fell over 50% in February. The decrease for commercial permits was only 20%, coming from office and recreational buildings; both being areas that showed the greatest increase in B.C., and with the 2010 Olympic Games starting February 12th, it’s no wonder that B.C. is continuing to build happily.

The only increase in permit value in Ontario was a 14% increase in the industrial sector. This comes, however, right after a 50% decrease in January.

In the residential sector, things are mostly unchanged right now, with only a 0.3% decrease in the value of permits, largely due to a 10.6% increase in the permits for “multi-family dwellings”, meaning a structure or site that will house more than 5 families. Again, Ontario is one of the provinces that has shown a decline even in this area though, with B.C. again leading in this area. Toronto also has shown declines for all areas, across the board (commercial, residential, industrial, institutional, recreational … ALL components) with B.C. leading the way in pretty much all areas. Even so, looking across the value of building permits, across all areas, by city since October, none of the stats look incredibly good. Vancouver has gone down from $456 million in October to $330 million in February, and Toronto has gone down from $840 million in October to $569 million in February, but Toronto spiked to $1.09 billion in December.