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Further indications of construction slowdown

Further indications of construction slowdown

Posted on: 10/16/2017 | Author: ATB Financial's Economics + Research Team

New data on non-residential construction investment shows construction activity is slowing in the province, confirming similar indications from last week’s report on building permits.

Between July and the end of September, builders in Alberta spent $2.3 billion on commercial, industrial and institutional construction projects. The figure is adjusted for seasonality and is calculated in current dollars. The third report of the year showed the lowest total since the second quarter of 2013, with a decline of close to four per cent from the previous quarter and a seven per cent drop over the third quarter of 2016.

Not surprisingly, the drop in non-residential investment has come at a cost to Alberta’s industrial and commercial sectors. Construction of commercial and industrial projects such as office towers, shopping malls, factories, and business parks have been hardest hit. Since the same quarter last year, investment in construction is down by nearly nine per cent across the board. Part of this has to do with recessionary conditions, but the boom of 2010 to 2014 caused a surplus of downtown office space that is also putting downward pressure on construction.

Institutional and governmental construction spending did pick up at the beginning of the recession in 2015. That being said, spending on the construction of schools, hospitals and other institutional buildings in the third quarter declined by three per cent (year-over-year).

With a surplus of office real estate in Alberta’s main cities and a general economic recovery taking place, construction over the next couple of years will be at a much slower pace than Alberta is accustomed to seeing.

Investment in non residential construction, graph

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