Value of Nonresidential Construction

Canada benefited from a strong real estate and construction sector prior to the recession, and construction expenditure increased each year from 2003 to 2008. However, nonresidential construction plummeted 9.8% in 2009 as the recession forced businesses to cut back on investment plans. Investment grew in the years since, primarily due to the release of pent-up demand and rising commodity prices encouraging the development of infrastructure to extract and transport said commodities. The Bank of Canada also slashed interest rates following the recession, making it less costly for developers to obtain financing. These positive factors, combined with general economic recovery following the global financial crisis, resulted in strong growth in construction spending through 2014.

However, the value of nonresidential construction declined significantly in both 2015 and 2016, as plummeting crude oil prices discouraged capital expenditures in extraction and refining-related industries, in addition to the many peripheral industries in the Canadian economy that rely on crude oil exports. In 2017, a recovery in the world price of crude oil, despite Canadian supply chain issues, in conjunction with growth in the Canadian economy, spurred the value of nonresidential construction to increase 0.8%. Nonresidential construction experienced slightly quicker growth in 2018 and abated growth in 2019 as heightened volatility and mounting fears of a global slowdown weighed on investment growth.

A widespread collapse in economic activity stemming from the COVID-19 (coronavirus) outbreak significantly weighed on nonresidential construction in 2020 due to reduced domestic and global demand for goods. This was especially true for the Canadian energy sector, as oil producers diminished capital spending during 2020 due to the significant decline in the price of and demand for Canadian oil. However, interest rates were slashed to near-zero in 2020 and a low interest rate environment ultimately boosted nonresidential construction activity due to very low financing costs. While initial estimates had the Canadian economy reaching a full reopening by year-end 2021, rising coronavirus cases, resulting from the persistent delta variant, postponed forecasts limiting nonresidential construction growth during the year.

However in 2022, nonresidential construction growth surged as improved supply chains, rising corporate profit levels and a fully reopened Canadian economy led to the annual value to increase an estimated 6.9% during 2022 alone. During 2023, growth continued, with the value of nonresidential construction increasing 4.2%. Despite surging interest rates and high costs, investment remains afloat primarily due to supply conditions still not being met in Canadian markets, which has led to sustained investment. Despite rate cuts being made during 2024, the Canadian economy endured a prolonged period of high interest rates however, which led to non-residential construction declining 1.6% during the year. Similar to residential construction, nonresidential construction will benefit from continued rate cuts during 2025, leading to growth of 0.7%. Over the five years to 2025, IBISWorld expects that the value of non-residential construction will increase 2.1%, despite the negative effects of the pandemic and high interest rates.