According to Statistics Canada, solid growth of industrial construction (3.5% quarter over quarter), commercial construction (2.9%) and institutional construction (0.7%) combined to increase the total investment in non-residential building construction in Canada by 2.4% in fourth-quarter 2007, its fourth consecutive 2%-plus quarter-over-quarter increase.

For 2007 as a whole, the total value of non-residential investment increased by 10.8%, following increases of 10.9% in 2006 and 11.9% in 2005. In constant dollar terms, non-residential investment increased by a rather modest 0.1% in the fourth quarter. That figure brings the annual rise to 1.5%, compared to 3.2% in 2006 and 2.6% in 2005.

Commercial Construction by Far the Strongest
Of the three categories of non-residential building construction — industrial, institutional and commercial — commercial construction was by far the strongest in 2007. During the year, it rose by 18.3% and accounted for 95% of the increase in total non-residential construction for the year as a whole. This 95% figure is up considerably from its 58% level in 2006.

Institutional construction rose by 3.9% in 2007, compared to 10.3% in 2006. Meanwhile, the value of industrial building declined by 3.4% in 2007, following a 10.4% increase in 2006. Sustained moderately-strong growth of industrial construction in the final three quarters of the year was not sufficient to offset the effects of a 6.5% drop in the first quarter.

Regionally, Alberta Accounted for Two-thirds of the Total Increase
Regionally, a 38.6% year-over-year increase in non-residential building construction in Alberta accounted for two-thirds of the increase in total construction for the country as a whole.

Although non-residential investment in Newfoundland slowed in the fourth quarter, it was up by 16.1% for the year, largely due to a 55% increase in industrial construction.

Other provinces that saw healthy increases in non-residential building in 2007 included British Columbia (+13.1%), Québec (+6.9%), Saskatchewan (+6.4%), New Brunswick (+3.2%) and Ontario (+1.6%). Non-residential investment declined in Prince Edward Island (-24.4%), Nova Scotia (-11.1%) and Manitoba (-1.5%).

Some Clouds on the Horizon
Looking forward, a large number of ongoing non-residential building projects, mainly in Alberta, will support non-residential construction well into 2008. However, the combination of slower growth of corporate profits, declining rates of industrial capacity utilization and the recent sharp deterioration in investor confidence is likely to significantly slow growth of non-residential construction investment in the second half of the year, extending through 2009.

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