Ontario Construction Secretariat

February 16, 2005 11:40 ET

ICI CONSTRUCTION TO GROW 3% in 2005; RESIDENTIAL TO SLOW 10%

Ethanol Plants and Rapid Transit Among Growth Factors Across Province Attention: Business/Financial Editor, City Editor TORONTO, ON--(CCNMatthews - Feb. 16, 2005) - Industrial, Commercial and Institutional (ICI) construction is expected to grow by approximately 3% in Ontario in 2005 while home building is anticipated to slow by approximately 10%, according to experts speaking at yesterday's State of the Industry and Outlook Conference hosted by the Ontario Construction Secretariat (OCS).

Attendees at the fifth annual conference heard that political, economic and demographic factors - from the rise in the value of the Canadian dollar to changes in population and immigration demographics to the provincial infrastructure renewal program - are affecting the growth of Ontario's construction industry.

Overall Findings

According to projections from the Construction Sector Council, which are subject to further review, ICI construction is anticipated to grow 3% province-wide in 2005 and 1% in 2006. Construction projects such as ethanol plants, rapid transit, medical and educational facilities will lead the growth.

Looking at 2004, commercial building intentions alone increased 12% across the province and are expected to grow 5.0% in 2005 and 7.6% in 2006, given consumer confidence and spending.

Industrial permits declined 11% in 2004, largely due to the increased value of the Canadian dollar against US currency and increasing construction costs. Over the next two years, the high Canadian dollar and energy costs could hamper growth, but industrial construction is still expected to exhibit the strongest growth rate in the next two years…7.3% and 12.7% respectively.

Institutional, the driving force of ICI construction in recent years, appears poised to taper off in 2005 and slow in 2006, particularly given the province's current deficit burden.

Ontario's total construction industry employed just over 270,000 people in 2004.

"When you look at Ontario construction data, what you really get is a sense of what is happening in Toronto but not in the rest of the province," Katherine Jacobs, OCS's Director of Research and Analysis. "The volume of activity in Toronto dominates construction data in Ontario."

GTA Findings

The GTA accounts for close to half of all construction in the province, employing approximately 112,000 workers in 2004. The ICI sector dropped 9% in 2004, but remains at a record high of $3.8-billion.

Institutional construction growth has been strong in recent years, up until 2004 when it declined 33%, due to tighter fiscal conditions.

Commercial construction experienced renewed growth in recent years, up 39% in the past two years. Activity in this sector is expected to remain strong in 2005 as a number of large projects continue and new ones come on stream.

Industrial permits declined 13% in the GTA in 2004 and concerns still exist because of slowdowns in the manufacturing sector and rivalry with BC and other provinces for TV and film production. A major factor in future growth will be the proposed $1-billion conversion of the Oakville Ford plant to a flexible manufacturing facility. Additional growth drivers stem from anticipated projects, including the Trump development, and massive renovations to Union Station, the Art Gallery of Ontario and the Royal Ontario Museum. There are currently over 2,000 proposed or contemplated ICI projects.

Central Ontario

Central Ontario is the second largest economic region in the province, comprising Hamilton/Niagara, Kitchener/Waterloo, Muskoka and the Kawarthas. Central Ontario employs an estimated 75,000 construction workers.

Total building permits in this region have more than doubled since 1995, reaching a record $6.7-billion in 2004. ICI construction was part of this upswing but saw moderate fluctuations over the last two years.

Hamilton is the exception, where ICI permits dropped 50% in 2004. In Hamilton's Institutional sector, permits dropped 73% last year.

Institutional growth has been slow or negative in recent years (less than 1% growth in 2003, 7% decline in 2004) but work will continue in this sector with several new projects about to get underway in 2005 and 2006. These include the proposed Waterloo Light Rail System, Peterborough Regional Hospital and Royal Victoria Hospital in Barrie.

Eastern Ontario

Ottawa and Kingston account for over 75% of construction activity in this region, which employs approximately 30,000 workers. Over the past two years, ICI permits were down slightly, dipping below the $1-billion mark for the first time in four years.

Institutional and commercial sectors drove growth in ICI construction from 1996-2002. More recently, however, commercial activity has accounted for the majority of ICI construction, due to demand from government, hi-tech and more recently the retail sector. As the technology sector rebounds, Commercial activity is expected to as well.

Government offices, the proposed Ottawa light rail transit expansion, hospitals and other medical facilities and educational buildings will play a significant role over the next couple of years. Specific initiatives beyond the light rail expansion include Le Breton Flats (Ottawa), Queen's University (Kingston) and Water Pollution Control project in Kingston.

Southwestern Ontario

Southwestern Ontario includes London/Woodstock, Windsor/Sarnia and Stratford/Bruce.
This is the only region to exhibit employment growth in 2004, reaching 37,000 workers.

Much of the growth in this region was due to residential construction, which has grown at a record pace since 1995, reaching $1.5-billion in 2004. ICI construction, on the other hand, has moderated since peaking at $1.2-billion in 2002; ICI construction intentions for 2004 totaled $1 billion.

The Institutional sector has been a driving force for ICI construction in Southwestern Ontario, accounting for 37% of permits in 2004. Annual growth in institutional permits reached 71% in 2001, and 14.6% in 2004.

Future growth in this region looks positive, particularly in Sarnia where several large scale industrial projects have been proposed by Suncor, Nova Chemical and Imperial Oil. The total value of these projects alone exceeds $1-billion.

Northern Ontario

Northern Ontario is quite different from the four other regions, one example being that ICI permits often exceed residential. In 2004, 51% of all permits issued were in the ICI sector.

Institutional construction has been behind steady growth in ICI construction since 1996, accounting for close to 38% of ICI permits in 2004. New hospital construction in Sault Ste. Marie and North Bay will help fuel continued activity in the coming years.

Industrial activity, which recovered partially from a 55% drop in activity in 2003, is poised for growth pending several major energy and mining projects. These include the proposed DeBeers Diamond Mine in Sudbury and the $2-billion Synfuel Technologies is intending to spend on five power plants and related infrastructure in the region.

More detailed regional construction data is available through the Ontario Construction Secretariat.

Allan Gregg, Chair of Strategic Counsel Inc., told participants at the Conference about the impacts demographic changes can be expected to have on the construction industry. "Society doesn't change in a straight line," Mr. Gregg said. "Demography changes values - or attitudes - and those values change public policy. Construction, like other sectors, will follow.

"Given the move towards more community-based health care, for example, it won't be long until grocery store chains include medical clinics…the way some now provide financial services as well as bottles of ketchup."

Hon. David Caplan, Ontario's Minister of Public Infrastructure Renewal, told the Conference that "infrastructure and capital are only the means to an end. For example, a municipality faces the costs of pipelines and purification plants in order to provide clean water to its residents.

"A lot of the public infrastructure that we rely on is wearing out. We must plan and invest now to provide the infrastructure we anticipate needing for the four million new Ontarians expected to live in the Greater Golden Horseshoe by the year 2031."

The Ontario Construction Secretariat represents the views and interests of management and unionized labour in the Industrial, Commercial and Institutional construction (ICI) sector. OCS gathers and distributes data to demonstrate the economic contribution, capabilities and performance of the organized ICI construction sector and hold regular conferences between labour and management partners.
IN: ECONOMY, LABOUR

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