Investment in non-residential building construction

Investment in non-residential building construction set a seventh consecutive annual record in 2007, thanks largely to huge gains in the construction of office buildings in Alberta and British Columbia.

Investment in commercial, industrial and institutional projects hit $39.8 billion, up 10.8% from 2006. Furthermore, the outlook for 2008 remains positive with more than 12,000 of major projects under construction for a value of $21.5 billion, an increase of 4.0% compared with the same period of 2006.

In constant dollars, annual investment was up 1.5% from 2006 to a record high of $29.2 billion.

Two components contributed to the gain in 2007. Commercial investment rose 18.3% from 2006 to a record $23.8 billion, while institutional investment was up 3.9% to $10.4 billion, also a record. Industrial investment declined 3.4% to $5.6 billion.

Western Canada's dynamic economy continued to spark the non-residential sector. Alberta and British Columbia alone accounted for more than 80% of the total increase in non-residential investment nationally in 2007. In both provinces, commercial projects dominated investment.

Among other contributing factors were low vacancy rates for office buildings in large urban centres, strong consumer demand for durable goods and high corporate profits, in particular for banks and the oil and gas industry.

On a quarterly basis, investment hit $10.4 billion in the last three months of 2007, up 2.4% from the third quarter and the 19th consecutive quarterly increase. This gain was mainly the result of sustained commercial investment in Alberta and Central Canada. All three components contributed to the increase.

Overall, six provinces recorded fourth-quarter gains, but the biggest increases, in dollars, occurred in Ontario, Alberta and Quebec. In all three provinces, total investment reached record highs and was due mostly to the construction of major office buildings already underway.

Of the 34 census metropolitan areas (CMAs), 21 showed gains in the fourth quarter, with Toronto and Calgary showing the largest increases (in dollars). Both set a record high.

In contrast, Ottawa posted the biggest decline as a result of a decrease in all three components.

Commercial component: Heavy investment in Western and Central Canada

Commercial investment increased for the 20th consecutive quarter, reaching $6.3 billion during the last three months of 2007, a 2.9% increase from the third quarter.

That sent commercial investment to a record level for the year as a whole, thanks to huge spending on new offices, and retail and wholesale buildings in Alberta, British Columbia and Central Canada.

At the provincial level, the biggest fourth-quarter gains in dollars occurred in Alberta, Ontario and Quebec. All three provinces set record highs.

In contrast, Manitoba experienced a decrease for a third consecutive quarter, dropping by 18.7% to $101 million.

Among the CMAs, 20 of 34 registered increases in the last three months of 2007. Calgary experienced the greatest gains, followed closely by Toronto.

Winnipeg showed the largest drop (-21.7%), which was a third consecutive quarterly decline. This was the result of lower spending on major commercial projects reaching completion at the end of 2007.

Several economic factors were consistent with a fertile environment for the commercial sector, including vigorous growth in retail and wholesale sectors, and low vacancy rates for office buildings in major urban centres.

Record fourth-quarter investment in institutional buildings

Investment in institutional building construction reached a record $2.7 billion in the fourth quarter, up 0.7% from the previous three months.

Fourth-quarter investment increases were shared by five provinces and two territories. Quebec recorded the largest gain in dollars, a fourth consecutive quarterly gain, as a result of significant spending on the construction of educational and health care buildings.

In contrast, British Columbia posted the largest reduction in dollars. This decrease was the result of institutional construction projects started at the end of 2005 and early 2006 and now mostly completed.

Of the 34 CMAs, 17 posted increases. Toronto and Montréal posted the highest fourth-quarter gains, the result of higher spending on projects for educational and health facilities.

After 10 consecutive quarterly gains, Calgary posted the largest decline in dollars. Despite this decrease, the annual total was 72.4% higher than the level recorded in 2006.

Industrial component: Increases in the last three quarters

Industrial investment reached $1.5 billion in the fourth quarter, up 3.5% from third quarter, and a third consecutive quarterly increase. This increase was due to strong spending on the construction of maintenance and primary buildings in seven provinces.

Despite the fourth-quarter gain, total industrial investment for the year fell 3.4% because of a drop in spending in six provinces.

At the provincial level, the largest contribution to the quarterly increase (in dollars) occurred in Ontario. This reflected a higher number of major projects for manufacturing plants, utilities and maintenance buildings that began in 2006 and 2007.

Following two quarterly gains, Quebec posted the largest decline (in dollars), as investment in manufacturing and utilities buildings categories dropped. This decline was the result of several industrial projects, which started in 2005 and 2006 and are now mostly completed.

Manufacturers continued to face increased production costs, stronger global competition and the appreciation of the Canadian dollar in the fourth quarter. Even so, they were optimistic about the outlook for production, according to Statistics Canada's Business Conditions Survey for October 2007.

Of the 34 CMAs, 20 posted increases. Toronto posted the highest fourth-quarter gains, as a result of higher spending on the construction in manufacturing, maintenance and utilities buildings.

For the second consecutive quarter, Calgary registered the most significant decline in dollars, in the wake of a drop in the majority of 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.