Investment in industrial and commercial construction projects in Ontario is expected to increase in 2014 while a decline is anticipated in the institutional sector.
That’s the bottom line in a forecast released recently by the Ontario Construction Secretariat (OCS).
The OCS says in its March economic outlook that the fortunes of the industrial and commercial sectors will be lifted by growth of the U.S. economy while institutional investment will continue to drop, as it has done for the past two years.
In the industrial sector, forecasters are projecting that acceleration in the U.S. economy will provide a boost to manufacturers in Ontario.
The OCS says that improved manufacturing sales should stimulate increased industrial investment.
The forecast says that the mining sector is difficult to forecast, as evidenced by the recent decision by Cliffs Natural Resources to indefinitely suspend its Ring of Fire project.
However, the forecast notes that conversations with stakeholders in northern Ontario indicate that the mining sector will provide a lift to industrial investment, thanks to projects like the Red Lake and Musselwhite mines in northwestern Ontario.
Large-scale transportation projects will also help boost industrial investment in 2014, the forecast says, one being the $2-billion Ottawa LRT, which is scheduled for completion in 2017.
In the commercial sector, forecasters project investment will increase, albeit at a slower place than in 2013.
Economic conditions are supportive for continued commercial investment, the forecast notes, and company surveys conducted by the Bank of Canada reveal that credit is easily accessible.
The forecast notes that indicators of business sentiment remain around their historical averages, interest rates remain well below historical levels and operating profits as a share of the economy have been normal in 2013. Additionally, economic growth is expected to accelerate and the province’s population will likely increase next year.
Regionally, the forecast says the GTA looks to be the largest contributor to commercial investment, as the region is enjoying an office construction cycle. Within downtown Toronto, seven new office buildings are scheduled to come online between 2014 and 2017.
In the institutional sector, the forecast notes that expenditures have been dropping since 2011, and the question now becomes: How long is the decline going to be in place?
Unfortunately, the forecast says that building permit data – which is a very strong predictor of upcoming institutional investment – is suggesting the downward trend will continue.
The OCS model of institutional investment, which considers building permits and population changes, is pointing to a decline of about five per cent in investment in 2014.