Office construction at a record high

OTTAWA – Canada’s non-residential construction industry is expected to hit a record $2 billion in profits this year according to the Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Non-Residential Construction Industry report for 2007.

“Construction of office buildings, especially in Alberta and Ontario, is the main reason for the record financial performance in recent years,” Valerie Poulin, economist, said in a statement. “However, rising material and labour costs are starting to trim builders’ profit margins. Since labour accounts for a third of all costs, the tight labour market is of particular concern for the industry.”

Economic growth, which is lowering office vacancy rates and encouraging construction activity, has led to record price increases in 2006 and 2007. Revenues and costs rose by more than 20 per cent in 2006, and are predicted to increase by more than 10 per cent this year. In 2007, revenues will again rise faster than costs, as they have for the past two years.

Construction growth is expected to ease slightly in the next two years, while labour and material costs will increase faster than revenues beginning in 2008. Profit levels are expected to fall every year through 2011, but will still be considered high by historical standards.

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