The outlook for the industrial, commercial and engineering sectors of the province’s construction industry is bright for 2013, but not so good for the institutional sector, according to a report released recently by the Ontario Construction Secretariat (OCS).
The report says the outlook for industrial investment is positive for 2013, as foreshadowed by a 19-per-cent year-over-year increase in industrial building permits in 2012.
Investment in the industrial sector is expected to be driven by continued growth in the U.S. economy, which will lead to increased exports and higher manufacturing revenues.
Additionally, the capacity utilization rate – which measures the intensity with which resources in the manufacturing sector are being utilized – is currently above-average, meaning that there is an incentive to expand capital through investment.
Industrial activity will also be helped by the mining sector, the report says, thanks to work at the Red Lake and Musselwhite mines. Additionally, industrial investment will receive a lift from Vale’s $1-billion Atmospheric Emission Reductions (AER) plant in Sudbury.
Large-scale transportation projects will help stimulate construction in the industrial sector, the report says, specifically the light rail transit projects in Ottawa and Waterloo Region and the Metrolinx projects in the GTA.
Investment in the commercial sector is expected to grow at a decent pace over the next three years, the report notes, consistent with a steadily improving economy and labour market, continued population growth and increase in the value of building permits issued.
Strength will be concentrated in the Greater Toronto Area (GTA). The migration of the echo-boomer generation to the downtown core has played a role in stimulating office building demand, which when combined with tight supply conditions, has spurred a new office construction cycle.
Commercial investment in other regions of the province will also likely grow, the report says, though perhaps not as fast as the GTA.
PanAm Games projects, which are considered commercial, are also expected to help boost investment. The capital budget for the Games is $674 million and includes a number of projects in the GTA and Hamilton. Several of the projects have already been tendered by Infrastructure Ontario.
In the engineering sector, investment is projected to be fairly solid in 2013 before slowing in later years due to fiscal austerity measures.
Almost every region of the province has one or more major engineering projects planned or under way, the report states.
The GTA is home to the Metrolinx transportation projects and construction on highway 407. Looking longer-term, there is also the anticipated nuclear rebuild project slated for 2016.
Light Rail Transit projects in both Ottawa and Waterloo Region are expected to lift engineering investment over the next three years. Engineering investment will also be strengthened by the mining sector in northern Ontario and the Rt. Hon. Herb Gray Parkway and Detroit River International Crossing in southwestern Ontario.
The institutional, sector, however, is expected to weaken, the report states, as government spending retrenches and the sector continues to unwind from the stimulus-related gains seen in 2010 and 2011 when institutional investment grew by a meaty eight per cent.
Softening institutional activity is already evident as institutional permits declined 22 per cent in 2012 versus 2011.
Major institutional projects currently under way include the $2-billion hospital in Oakville and the $1.75-billion Humber River Regional Hospital.
Infrastructure Ontario has indicated that there are roughly 29 major institutional projects that are currently in the planning stage.