OTTAWA — Canada's non-residential construction industry is expected to overcome rising costs and post record profits of $2-billion in 2007, before tailing off for four years, the Conference Board of Canada says in its industrial outlook report.
The prediction comes after more than three years of growth.
“Construction of office buildings, especially in Alberta and Ontario, is the main reason for the record financial performance in recent years,” board economist Valerie Poulin said in a release Thursday.
“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 is pushing office vacancy rates down and spurring construction activity, leading to record price increases last year and this year, the board said.
Both revenues and costs rose by more than 20 per cent in 2006 and are forecast to increase by more than 10 per cent this year.
“Growth in demand for new construction is forecast to ease slightly in the next two years,” the board said. “Meanwhile, labour and material costs will increase faster than revenues beginning in 2008.
“Profit levels are expected to fall every year through 2011, but they will still be considered high by historical standards. As it is too early to assess the impact of the subprime mortgage crisis on the overall economy, the current uncertainty is not included in the outlook for Canada's non-residential construction industry.”
