Most people say that after a year like 2009, the only place to go in 2010 is up. Provided that publicly-funded project promises and the magic of federal stimulus come through, that very well could be the case.

When the credit crunch hit, the whole world took the heat. But for Canada it could have been worse. “As a whole, the construction industry rode it out well as we now head into a recovery,” says George Gritziotis, executive director of Canada’s Construction Sector Council.

Although housing starts took the brunt of it, non-residential work from 2008 spilled over into 2009, mitigating the economic impact. The stimulus budget and home renovation tax credit program also helped to off-set the overall deterioration of the industry, says Gritziotis, adding that many road building and institutional projects are ‘infrastructure tagged stimulus and have that horsepower behind them.’”

A number of institutional projects are set to go to tender this year, and the key to watch for will be the pace at which they roll out. The industry is anticipating consistent prices in commodities and the bulk of stimulus projects moving forward, a combination set to create labour market pressure,” says Gritziotis. “We have to make sure we have the capacity to respond.”

Almost a bigger issue is the retiring workforce, which will leave behind more positions for skilled workers than Canada is producing. “Even during the worst of the recession there were still sectors in Canada suffering from a labour shortage,” says Gritziotis. “So when you add the demographic card to the current situation, that will be a big concern.”

Canada already loses an average of 1.5 to 2 percent of its workforce annually. But for the construction sector, the shortage isn’t about bodies – its about skilled labour. “You can have able bodies, but if you don’t have the classrooms, instructors, or facilities, then how can those able bodies get into the industry in an appropriate way?

“The good news is there has been more investment in construction schools and community colleges, and the industry training authorities have done a lot of work to build the training capacity and focus on it,” says Gritziotis.

According to a leader survey conducted by the Construction Sector Council last year, a major concern is the capacity of contractors to respond to changes in the market. “As new home builds start to tail off, you have a lot of builders who have been in stick building for years, and so they aren’t immediately mobile into, say, road building,” says Gritziotis, noting that bid lists for infrastructure projects already have names on them that weren’t there in the past.

“A contractor’s capacity based on different types of investment is important and one thing they should be sensitive to is how quickly investment can shift from one type of infrastructure to another.”

According to Luc Bourgoin, chief economist with l’Association de la construction du Quebec (Construction Association of Quebec), all things seem to indicate that province’s economy is on the verge of a recovery, the strongest part of which will be apparent in the second half of the year.

As is the case elsewhere in Canada, federal and provincial government recovery plans have boosted the economy with infrastructure projects. In 2009, capital expenditures for construction activities were set to reach $41 billion, and Bourgoin expects approximately the same level of capital investment in 2010.

A slowdown in the residential sector may also be imminent, but a significant increase in the non-residential sector is expected to mitigate low housing starts. Also, difficulties in the industrial sector have been in the works for the past few years. 

From 2010 onwards, the increase in the demand for exports as well as the rise of the price of energy and raw materials should help trigger investment intentions in Quebec’s manufacturing sector.

Consumer confidence has been severely shaken during the last trimesters, putting a damper on investment intentions for commercial projects mainly in the retail sector.”Fortunately, there are still important projects that are in progress as we speak and will be continuing in 2010 in and around Montreal,” says Bourgoin.

In the institutional sector, three major hospital projects in Montreal will require approximately $3.5 billion in investment, and at least one is set to begin in 2010. Also, the Quebec Infrastructures Plan announced in 2007 will continue to provide capital expenditures totaling $30 billion in a five-year period.

“The plan is also designed to eliminate the maintenance deficit of our infrastructures over the next 15 years (the maintenance deficit is evaluated at $27 billion),” says Bourgoin.
Work on Hydro-Quebec’s power station project La Romaine began in 2009 and will generate $6.5 billion in investment. Earmarked for road building is $30 billion of the province’s infrastructure plan fund.   

Bourgoin expects labour demand to remain strong, especially in trades relating to civil engineering and road building, with approximately 14,000 new employees recruited annually between 2010 and 2012.

“In order to stay on top, contractors will have to continue developing new ‘savoir-faire’,” says Bourgoin. “Quality, as well as cost efficiency, will continue to be important stakes in the coming years. And finally, establishing new partnerships with clients, with professionals (engineers and architects), and with suppliers will become the way of doing business in the near future.” 