The consensus is work-from-home is temporary, but real estate developers might not be so sure. Statistics Canada (Stat Can) data shows construction investment reached a high in January. The trend is driven by residential construction investment, which reached a new record. Non-residential construction showed minimal growth, and is now effectively negative in real terms.
Canadian Building Construction Investment Reaches A Record High
Canada’s construction investment started the year off with a new all-time high. The seasonally adjusted total reached $16 billion in January, up 2.8% from the month before. Residential construction investment represented $11.6 billion of the total, up 3.9% over the same period. The rest was $4.4 billion in non-residential construction investment, just 0.2% higher. One segment is definitely showing much more growth.
Canadian Construction InvestmentCanada’s seasonally adjusted total construction investment. Source: Stat Can, Better Dwelling.
Construction investment growth was driven almost exclusively by the residential segment. January was both a record for total construction investment, and the residential subcomponent. Residential construction now accounts for a record 72.3% of the month’s dollar value. Non-residential investment showed small growth, which is better than being negative. However, it was also down 18.1% from peak investment.
Canadian Construction InvestmentCanada’s seasonally adjusted construction investment, by residential and non-residential components. Source: Stat Can, Better Dwelling.
Toronto Construction Investment Underperforms National Growth
The Toronto CMA represented almost a fifth of construction investment. The seasonally adjusted total reached $3.0 billion in January, up 1.3% from the month before. The residential portion represented $2.1 billion of the total, increasing 1.7% over the same period. The remaining non-residential portion was reported at $969.7 million, 0.3% higher.
Toronto is underperforming the rate of growth due to slower residential growth. The residential rate is growing at about half the rate of the national number. As slow as it is, that rate is still 5x larger than the rate of growth for non-residential investment. The non-residential component would be negative in real terms.
Vancouver Construction Investment Peaked In 2019
Vancouver CMA has half the construction investment of Toronto, but is growing faster. The seasonally adjusted total reached $1.4 billion in January, up 2.1% from a month before. Residential construction represented $1.0 billion of the total, up 2.5% over the same period. Non-residential represented $424.3 million, 1.1% higher.
Vancouver’s rate of growth is higher than Toronto, but it’s a lot lower from peak growth for the region. Residential construction investment is slower than the national rate. In fact, peak investment for the city was all the way back in May 2019. Yes, before the pandemic. Non-residential construction is growing faster than the national rate. This is a positive note, however, investment in the segment is still below the dollar volume peak seen in 2019.
There’s record construction investment, but the trend is driven almost entirely by the residential segment. Low rates typically drive investment for all segments, so this is interesting. Most investment is being sunk into residential construction, while non-residential slows. The slowdown in the latter may be indicative of developers taking a wait and see approach to the post-pandemic world. Especially since a rise in work-from-home can seriously disrupt the revenues of commercial and industrial space.
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