Energy sector still a drag, infrastructure may be a tonic: RICS

The continued drop in the price of oil is further depressing construction investment in Canada, especially in heavily energy-focused areas such as Alberta. But this downward trend is being partly offset by greater investment in infrastructure, both at the federal level under the Trudeau government and in some provinces, according to the latest RICS Canadian Construction Market Survey (Q4 2015). Infrastructure activity rose firmly in that quarter according to respondents, with about two-thirds expecting this sector to see the most growth in output during 2016, and almost half expecting the new government’s plans for infrastructure development to start feeding into activity over the course of the year.

“The new Federal government in Canada has committed to increasing Federal spending on Infrastructure projects,” says Joe Rekab, partner, BTY Group, Vancouver, a survey respondent. “Similarly, governments in provinces that have been hard-hit by the energy downturn have also committed to backfilling this shortfall by increasing provincial investment and funding of public-sector projects. Here in British Columbia, for example, infrastructure will continue expanding as the budget is revealed, with additional investments in transportation and education leading the way. And Alberta also has some significant projects slated for 2016, most notably the circa $1 billion Calgary Cancer Centre and expansion of the Edmonton Light Rail Transit.” And there is considerable infrastructure activity outside the hardest-hit areas, Rekab points out: Quebec, for example, has two major transit corridor projects valued in the circa $1billion range and led by Caisse de depot et placement du Quebec – one linking downtown Montreal to the airport and the other servicing the south shore via the new Champlain Bridge.

Not all respondents, however, share this optimistic view of infrastructure’s potential under the still fairly new government. “Infrastructure is seen by many as the new bright hope in Canada, and the new federal government talks a good game, but when are they going to act, especially with national infrastructure conditions reaching critical levels?,” asks Ian Woods, principal of Markham, Ont.-based Fraser Woods Inc. “And notwithstanding the usual political rhetoric and blame games, especially with a political party change, the revenues and royalties anticipated from oil and gas have nose-dived, leaving big problems. The new government announced just yesterday that the 2016 federal deficit will be $C18.4 billion plus billions to be spent on their campaign promises, bringing the 2016 deficit to $C30 billion.” On top of that, he says, the media report frequent cost overruns on major public projects, at least around Toronto and Ontario. For example, a current subway project jumped about 45 per cent in costs in mid-project, Woods says.

In other survey findings, half or more of all respondents reported that planning and regulation, financial constraints and competition all limited their activity. And while less than one-third of respondents encountered labor shortages across all categories, 52 per cent reported difficulties finding quantity surveyors.

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