Investment in non-residential building construction

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Investment in non-residential building construction marked its fourth consecutive year of uninterrupted growth, fuelled mostly by sustained commercial investment in Central Canada and Alberta.

Non-residential investment hit $10.4 billion in the third quarter, up 4.9% from the second quarter.

In constant dollars, third-quarter investment was up 0.9% from the second quarter.

Growth in the non-residential sector has been on an uninterrupted upward trend since the middle of 2003.

The third-quarter increase was due mainly to the construction of major office buildings underway in Alberta, Quebec and Ontario.

Investment in the commercial component led the way with a 5.2% increase to $6.2 billion. In the institutional component, investment rose 5.3% to $2.7 billion, while investment in the industrial component increased 3.1% to $1.5 billion.

Overall, eight provinces and two territories recorded increases, but the biggest gains, in dollars, occurred in Ontario and Quebec. In both provinces, investment rose in all three components, reaching new record highs.

Among the factors sparking the non-residential sector are a strong labour market, high profits recorded by Canadian corporations, healthy retail and wholesale sectors, declining vacancy rates in large urban centres and Western Canada's dynamic economy.

Of the 34 census metropolitan areas (CMAs), 23 showed gains in the third quarter, with Toronto, Calgary and Montréal showing the largest increases (in dollars). Calgary and Montréal both set a new quarterly high.

Commercial: Robust gains in office building in Alberta, Quebec and Ontario

Investment in commercial building construction hit another record high, in the wake of robust activity in office building sites in Alberta, Quebec and Ontario.

Overall, seven provinces showed gains in commercial investment in the third quarter. Alberta (+7.8% to $1.6 billion), Ontario (+4.2% to $2.2 billion) and Quebec (+5.9% to $909 million) experienced the largest investment growth (in dollars), and each set a record high.

On the other hand, Nova Scotia experienced a second consecutive decline, which was the largest among the provinces. This decrease was the result of commercial construction projects started in mid-2005 and early 2006 and now mostly completed.

Among the 34 CMAs, 21 registered quarterly growth. The strongest gain (in dollars) was in Calgary, where investment rose 15.3% to $928 million. It was followed by Toronto, with a 6.0% increase to $1.2 billion.

Several economic factors were consistent with a fertile environment for the commercial sector. These included the vigorous retail and wholesale sectors and declining vacancy rates for office buildings in major Canadian urban centres. These declining rates have provided added incentive for office building construction and the construction of shopping malls and warehouses.

Institutional: New record, thanks to gains in educational building

Investment in institutional building construction increased for the third straight quarter. This robust gain was largely the result of strong spending on the construction of educational facilities in seven provinces.

Provincially, the biggest third-quarter increase (in dollars) occurred in Quebec, where investment rose 16.4% to $491 million, the third straight quarterly gain. This increase was the result of projects in educational and health care building construction.

In Ontario, which recorded growth for a second consecutive quarter, institutional investment increased 5.8% to $1.0 billion.

In contrast, British Columbia posted the biggest decline (in dollars). This decrease was the result of institutional construction projects started in mid-2005 and early 2006 and now mostly completed.

In total, 24 of the 34 CMAs posted gains. Toronto led the way in terms of growth (in dollars), its second consecutive quarterly gain. In contrast, Ottawa recorded the most significant decline.

Industrial: Back-to-back quarterly increases

Investment in industrial building construction increased for the second straight quarter.

Strong investment gains in primary industrial buildings in nine provinces, particularly Ontario and Quebec, more than offset declines in the other industrial categories.

At the provincial level, the largest contribution to the quarterly increase (in dollars) occurred in Ontario, the result of gains in all industrial construction buildings. This reflected a higher number of major projects for manufacturing plants and utilities buildings that began in 2007.

Alberta posted the largest decline (in dollars), as investment in all industrial building categories dropped after high spending in previous quarters. This decline was the result of several industrial projects that started in 2006 and that are now mostly completed.

In the third quarter, manufacturers continued to face increased production costs, stronger global competition and the appreciation of the Canadian dollar. On the other hand, the industrial capacity utilization rate among Canadian industries increased slightly in the second quarter of 2007.

Of the 34 CMAs, 21 posted increases. Toronto and Montréal posted the highest third-quarter increases, the result of further major industrial construction projects that started at the beginning of 2007.

After posting a record high in the second quarter, Calgary registered the most significant decline in dollars, in the wake of a drop in all industrial construction building categories.

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 from the Summary tables module of our website.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Bechir Oueriemmi (613-951-1165; bdp_information@statcan.gc.ca), Investment and Capital Stock Division.