Investment in non-residential building construction

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Last year's pace for investment in non-residential building construction continued into the first three months of 2008, again the result of major construction activity of office buildings underway in Alberta and Ontario.

First-quarter investment hit $10.3 billion, up 1.6% from the fourth quarter and the 20th consecutive quarterly increase.

In constant dollars, investment in non-residential building construction declined 0.3% from the fourth quarter.

Investment increased in all three components from the fourth quarter. In the commercial component, it rose 1.6% to $6.3 billion; in the industrial component, it went up 4.0% to $1.5 billion; in the institutional component, it edged up 0.2% to $2.6 billion.

Provincially, the biggest first-quarter increase (in dollars) occurred in Alberta, where investment rose 5.1% to $2.5 billion, a 19th consecutive quarterly gain. In Ontario, which was a close second, investment increased 3.1% to $3.8 billion, as a result of gains in all three components.

In contrast, British Columbia posted the biggest drop as a result of a decline in spending on construction of industrial and institutional projects. These projects were started in 2006 and early 2007 and are now almost complete.

The non-residential sector continued to be positively affected by low office vacancy rates, a vigorous retail sector and strong corporate profits.

Furthermore, investment intentions (including engineering construction), according to Statistics Canada's Survey of Private and Public Investment, are forecast to increase by 6.8% in 2008 from 2007.

Of the 34 census metropolitan areas, 15 registered quarterly growth. The strongest gain (in dollars) was in Toronto, where investment rose 4.2% to $1.9 billion. It was followed by Hamilton, where investment increased 24.5% to $166 million, the result of higher spending in all three components.

Commercial component: Robust office activity in Alberta and Ontario

Investment in commercial building construction reached a quarterly record high, thanks to the strong activity underway on office building construction sites in Alberta and Ontario.

Overall, four provinces and two territories showed increases in commercial investment in the first quarter. The largest contributions (in dollars) occurred in Alberta (+5.6% to $1.7 billion) and in Ontario (+1.9% to $2.2 billion). Both amounts are all-time highs.

After six consecutive quarterly increases, Quebec recorded the most significant decline as a result of a slowdown in investment in office buildings and shopping centres construction.

Among census metropolitan areas, 17 posted first-quarter gains. Commercial investment in Calgary and Toronto recorded the strongest gains in dollars.

In contrast, Montréal posted the largest decline, following seven consecutive quarterly increases, as several commercial projects that started in 2006 and 2007 are now almost complete.

A decline in vacancy rates in the major urban centres continued to put positive pressure on office building construction. In addition, growth in retail and wholesale trade in 2007 appears to have had a favourable impact on the construction of warehouses, which have posted eight quarterly gains in the last two years.

Industrial component: Gains in manufacturing plants and utilities buildings

Investment in industrial building construction increased for the fourth straight quarter. This was the result of strong investment gains in the construction of manufacturing plants and utilities buildings in six provinces, particularly Alberta and Ontario.

At the provincial level, the largest contribution to the quarterly increase (in dollars) occurred in Alberta. This was the result of spending on the construction of major projects for manufacturing plants and utilities buildings that began in 2007.

British Columbia posted the largest decline (in dollars), as investment in all industrial building categories fell after four consecutive quarterly gains. This decline was the result of several industrial projects, in particular warehouse and storage buildings, which started in 2006 and are now mostly complete.

Overall, 14 metropolitan areas registered quarterly growth, with the strongest gains in Edmonton and Toronto.

Calgary experienced the largest drop. This decline was the result of several industrial projects that started in 2006 and 2007, and are now mostly complete.

Institutional component: Spending remains stable

Following previous declines, spending in the institutional component saw a slight rebound of 0.2% to $2.6 billion in first quarter. A strong gain in spending on health care facilities more than offset declines in all other institutional categories.

Provincially, by far the biggest first-quarter increase (in dollars) occurred in Ontario, where investment rose 5.0% to $1.0 billion. This was due mainly to strong spending in the construction of health care facilities.

In contrast, British Columbia saw investment fall 4.5% to $372 million. The decrease was the result of institutional construction projects that started in mid-2005 and early 2006 and are now mostly complete.

Among census metropolitan areas, Hamilton led first-quarter growth, with investments rising 44.9% to $75 million. The gain was driven by substantial investments in health care and educational facilities.

For the second consecutive quarter, Calgary registered the most significant decline in dollars, in the wake of a drop in the majority of institutional construction building categories. Of the 34 census metropolitan areas, 22 posted declines.

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 Summary tables module of our website.

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

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