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Construction growth expected in Montreal, Moncton

0 649 Economic

by DON WALL

In this first of two articles examining 2016 regional forecasts for Canada's construction industry, the Daily Commercial News looks at Quebec and Atlantic Canada.
Construction growth expected in Montreal, Moncton

The power of government infrastructure spending to boost the economy is illustrated in two recent reports produced by the Conference Board of Canada analyzing current and future economic prospects across Canada.

The reports, released March 3, include forecasts of construction activity for each municipal market. Analysis of the five eastern Canadian provinces shows that the construction sectors of Montreal, Moncton, N.B and Quebec City will all see growth thanks in part to major government infrastructure investments, while St. John's, N.L. and Quebec's north shore will suffer as private-sector investment in the resource sector dries up with no significant public investments targeted to replace the losses.

Nationally, Canada's economy struggled in 2015, with real gross domestic product (GDP) estimated by the Conference Board to have grown by just 1.2 per cent, the lowest since 2009. Economic growth is expected to rise by 1.7 per cent in 2016 — with a full 0.3 per cent of that hike attributed to a significant promised federal infrastructure spend.

Economists Alan Arcand, co-author of the Conference Board reports, and Jean-Phillipe Cliche of the Association de la construction du Québec offered context on the construction sector forecasts for the five eastern Canadian provinces and nationally.

"Obviously there is a lot of weakness in the oil sector, with huge cuts in corporate profits, and when businesses see their profits fall they not only lay off workers but they also cut their capital expenditures," said Arcand of the national scene. "That's what we are seeing in the energy sector."

But federally, he said, "We expect to have infrastructure expenditure of $10 billion, so that is positive."

In Montreal, massive public spending will spur the construction industry forward for the next four years after three years of annual declines, led by the $4.2-billion Champlain Bridge and the $3.7-billion Turcot Interchange. Other major projects include work on the VilleMarie Expressway, the Centre hospitalier de l'Université de Montréal, the Université de Montréal's Outremont campus and repairs to Ste-Catherine Street.

Those spends will offset a decline in housing starts. Overall construction output in Montreal is expected to grow 2 per cent in 2016 and 2.2 per cent in 2017.

"We are waiting to see the impact of the federal budget on construction," said Cliche. "We hope that this is going to show in the data, it may surprise us at the end of the year in growth."

With the major transportation spends, he said, "We believe that this 2 per cent is even a bit pessimistic."

Moncton's construction sector is expected to roar ahead thanks to provincial spending.

The province's Strategic Infrastructure Initiative includes a new $107-million downtown entertainment and sports centre in the city, slated to open in 2018. This and other projects are expected to boost the construction sector by 3.7 per cent in both 2016 and 2017.

The economists differ on whether Quebec City's construction sector will grow in 2016. Residential building will slow down, says the Conference Board, and work concluded on a signature project, the Videotron Centre with its $400-million NHL-sized stadium, convincing the Conference Board to assess the city's prospective growth at 1.2 per cent in 2016 after 2.6-per-cent growth in 2015.

Explaining the Conference Board's positive number, Arcand said, "A lot of it has to do with the fact that it was strong throughout the year last year. We call it built-in growth, it's starting the year on such a high level, it's going to be tough for it to be negative."

"We do not see growth in the Quebec City market," said Cliche. "We feel there will be a decline. This number is really optimistic to us. It's a dynamic region but I think they've been over-constructing a little bit, especially in the residential sector and the commercial as well."

Quebec City's next major project is Le Phare de Québec, a $600-million mixed-use four-tower project that will be built over the next 10 years.

Cliche says low resources prices are hitting northern Quebec and the north shore hard: "In the Côte Nord, there was a lot of production in 2012 and now there is nothing at all. Mining, iron, gold, there is nothing that is going to start any time soon." But Quebec's trade balance with the U.S is improving, he notes, so one possible source of growth comes from the export manufacturing sector, which could see new plant builds.

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