Investment in non-residential building construction

Investment in non-residential building construction surpassed the $30-billion mark nationally for the first time ever in 2005, thanks largely to huge gains in Alberta and British Columbia.

Investment in commercial, industrial and institutional projects reached more than $31.2 billion last year, a 7.7% increase from 2004. It was the fifth consecutive record high. Increases in industrial and commercial investments offset a decline in the institutional sector.

In the last five years, non-residential investment in Canada has increased at an annual average rate of 6.4%, going from a level of $23 billion to more than $31 billion.

Between them, Alberta and British Columbia accounted for more than three-quarters of the total increase in non-residential investment nationally between 2004 and 2005. In both provinces, commercial projects dominated investment.

Non-residential building construction benefited from low interest rates throughout 2005, even though contractors had to contend with higher construction costs, which added upward pressure on amounts invested. On the manufacturing side, industries edged closer to a record high use of production capacity.

On a quarterly basis, investment during the last three months of 2005 in Canada reached $8.3 billion, up 4.5% from the third quarter.

All three sectors contributed to the gain. Commercial investment rose 4.4% to $4.6 billion; industrial investment was up 6.1% to $1.5 billion; and institutional investment rose 3.5% to $2.2 billion.

Every province recorded fourth-quarter gains, led by Ontario where investment in office buildings pushed up the total by 3.6% to $3.4 billion. This gain halted two quarterly declines.

Investment rose in 17 of 28 census metropolitan areas. The largest increase occurred in Edmonton, where gains in all three sectors led to a 19.6% advance in the third quarter to $354 million. In contrast, Kitchener posted the largest decline, falling 11.2% from the previous quarter.

Record quarter and year in the commercial sector

In the last three months of 2005, commercial investment increased for the ninth consecutive quarter to $4.6 billion.

In 2005, commercial investment increased 11.8% to $17.4 billion, mainly the result of an increase in office building and warehouse construction in Ontario and Alberta.

At the provincial level, increases of 5.5% in Ontario and 9.3% in Alberta contributed to the sector's growth in the fourth quarter. Quebec experienced the largest decrease for the second consecutive quarter, dropping by 3.1% to $681 million.

Among the census metropolitan areas, Edmonton experienced the greatest gains, increasing 20.7% to $203 million. Montréal showed the strongest decrease for the second straight quarter, dropping by 7.3% to $335 million.

Canadian corporations made record profits in the third quarter of 2005. Profits have risen for 4 consecutive quarters and in 13 of the 15 last quarters. The job market also showed a positive outlook with 233,000 new jobs created in 2005, of which 57,000 were in the construction industry. At the same time, a drop in vacancy rates in large urban centres provided an added incentive for office building construction.

Investment in industrial buildings grew steadily throughout the year

Industrial investment totalled $1.5 billion, up 6.1% in the fourth quarter of 2005, while annual growth was even more spectacular, increasing by 19.3% to $5.5 billion.

Investment in industrial buildings continued the upward trend that began in the first quarter of 2004, surpassing the previous peak reached in the first quarter of 2000.

During the last three months of 2005, investment jumped by 23.7% in Quebec to $364 million, but fell by 1.4% in Ontario to end the quarter at $548 million.

Of the 28 census metropolitan areas, 16 registered quarterly growth. For the second quarter in a row, Montréal showed the strongest investment growth (+28.8%) while Toronto experienced the largest downturn for the second consecutive quarter (-5.4%).

In 2005, high industrial capacity utilization rates seem to have stimulated industrial building construction. In particular, energy resource development pushed Alberta far ahead of the other provinces, increasing by 87.3% to $852 million. British Columbia placed second, followed by Ontario and Quebec. Only Saskatchewan and Newfoundland and Labrador posted decreases.

Third straight increase in institutional building investment

Supported by high activity in institutional construction in British Columbia, investment rose for a third consecutive quarter, increasing 3.5% to $2.2 billion.

As a result of significant spending on the construction of educational and health care facilities, British Columbia experienced the largest investment growth for a third consecutive quarter, rising by 18.2% to $314 million.

By contrast, Nova Scotia experienced the largest decrease, dropping by 17.3% to $76.3 million, after reaching record investment levels in the previous quarter.

Among census metropolitan areas, Vancouver posted the strongest growth in every quarter of 2005 with investment rising by 19.5% to $180 million in the fourth quarter.

London showed the largest drop (-21.6%) resulting from decreases in all categories of institutional buildings. Of the 28 census metropolitan areas, 16 registered increases.

On a year-to-date basis, investment in institutional buildings was the only component showing an annual decrease, dropping by 5.5% to $8.3 billion. A downturn in the construction of educational institutions caused this decrease.

Available on CANSIM: table 026-0016.

Definitions, data sources and methods: survey number 5014.

More detailed data on investment in non-residential building construction are also available in free tables online. From the Canadian Statistics page, choose Latest indicators, then Construction.

To order data, contact Patrick Lemire (613-951-6321; bdp_information@statcan.gc.ca). For more information, or to enquire about the concepts, methods or data quality of this release, Valérie Gaudreault (613-951-1165), Investment and Capital Stock Division.