The Canadian construction industry looks to bounce back next year after what is projected to be its first setback in growth in seven years.

Richard Branch, senior economist at Dodge Data & Analytics, recently gave a presentation on the state of the industry at Dodge’s annual construction outlook conference. Dodge predicts a 6-percent increase in Canadian building permit value in 2017 following a 3-percent decline in 2016. Prior to 2016, value had either increased or stayed the same year-to-year since 2010.

Courtesy of Dodge Data & Analytics
Courtesy of Dodge Data & Analytics

With tepid Gross Domestic Product growth in recent years, Branch said Canada has been “flirting with a recession.” However, indicators appear to be aiming up.

“The overall picture is positive for the Canadian economy as we head into next year,” he said.

The value of multifamily permits is projected to increase 4 percent in 2017, following an 11-percent retreat in 2016. Value increased over five of the prior six years.

Branch said this segment in Canada is being driven by demand from millennials, immigrants and baby boomers heading into retirement.

There is a regional component to it, however, as Alberta and British Columbia are showing signs of weakness. Alberta, for example, saw negative growth last year and this year. It is projected to turn that trend next year, but Branch said vacancy rates in the multifamily and commercial sectors are up.

“Going forward into 2017 … the East looks better than the West,” Branch said. “Montreal and Toronto will have more growth.”  He added that many of the country’s large projects in planning are in the Toronto area.

On the commercial side, retail permit values are projected to slip 4 percent in 2016 but grow 6 percent in 2017. Branch said Target’s exit from the country, as well as the emergence of online sales, has negatively affected the sector. However, mixed-use projects are seeing an uptick, and Canada is still an attractive place for U.S. business to expand.

“Costco is expanding aggressively into Canada, for example,” he said.

The office segment, meanwhile “will feel pain into 2017,” Branch said, as it is projected to decrease another 5-percent after consecutive 11-percent declines in value. “Permit value is set to hit a seven-year low,” Branch said, noting the segment continues to be plagued by rising vacancy rates.

Dodge predicts the Canadian institutional sector will see a 10-percent growth rate in 2017 after a 2-percent decline in 2016. Education, which represents almost half of the institutional permit value, will also grow at 10 percent. Permits in that subsector are slated for a fifth-straight year of increases in 2017.

“The K-12 group has been contracting over the last decade, but going forward, we’re starting to see that demographic switch,” said Branch, adding that it is getting a boost from immigration.

The healthcare segment saw a big 105-percent boom in 2014. “It has since fallen back down but is still hovering at about $2 billion CSD,” he said. “I think this is poised for strong growth not only next year but beyond.”

Healthcare building is projected in increase 15 percent in 2017.