Category: Economy

Key Takeaways:

• The short term forecast, particularly for public and civil work, looks strong.
• Inflation and long lead times on materials are expected to continue but might ease a bit.
• Labour shortages are here to stay as expected.
• Sustainability efforts, like electrification and the shift to greener energy sources are fueling projects.
• Inflation and recession concerns are likely to impact some parts of the residential sector.
• The demand for digitization and data continues to rise.

The Whole Story:

Few could have predicted that Russia would invade Ukraine, Elon Musk would buy Twitter and that inflation would soar in 2022.

While there’s no crystal ball to peer into for hints at how 2023 will go, we did the next best thing and asked as many construction leaders as we could about how they felt going into the new year. Generally, the industry is confident that despite some familiar challenges, the short-term forecast is looking rosy.

Orion Construction – (general contractor)

“We are cautiously optimistic,” said Josh Gaglardi, president of Orion Construction. “We are really hopeful to see some normalization and reduction in construction costs in the next 6-12 months as supply chains normalize a bit and demand for materials comes off a bit.” 

He added that regardless of what’s going on in the private market, there is still extremely strong demand for labour and materials in public work. 

“Demand will remain high this year so I am not too concerned about having work,” he said. “We have a firm footing to know where we are at and we can put together a strong gameplan.” 

In 2022, Gaglardi saw the stickiness of ESG and believes in the coming year and years after that, the industry could see those trickle down effects from investors. 

“In 2023 we have a handful of net-zero projects that we wouldn’t have had in years prior,” said Gaglardi. “We will see more solar panels, more sustainable initiatives, more consultation with First Nations groups for sure.” 

Alltrade Industrial Contractors – (industrial)

Electrification is here and it’s poised to create shockwaves. 

Kevin Ritzmann, senior director for Alltrade Industrial Contractors, said grid electrification will continue to increase both for new power generation with increased demand and for electric vehicle mandates across the country. He believes this will drive new investment in renewables across Canada and increase investment in provinces that are currently building renewables heavily – like Alberta, Saskatchewan, Quebec, and Ontario. This could also be bolstered by federal incentives which could slice the cost of renewable energy projects down. 

“What’s interesting is we thought in Ontario that we had enough power but it looks like there is more demand and with Pickering Nuclear coming down, we need more investment in power generation,” said Ritzmann.

He added that major car manufacturers are anticipating EV regulations and investing big in new or renovated facilities. 

2023 will also see continued investment in major transit infrastructure projects across Ontario, Quebec, and Alberta.  And as new projects enter into design phases there will be a pipeline of future work across Canada (Ontario Line, Eglinton Crosstown West Extension, GO Regional Express Rail, Calgary Green Line LRT).

Alltrade continues to see shortages of tradespeople and long lead times on materials, making one’s planning and partners more important than ever. He doesn’t expect these challenges to ease significantly in the coming year. He noted that the U.S. is experiencing similar project booms and is also competing for talent and materials. 

“We were seeing power transformers go from ten months to a year and half to as high as two years,” he said. “That’s a huge lead time.” 

Naikoon Contracting – (homebuilding)

Josef Geluch, president of Naikoon Contracting, believes there may be some sunny skies before the storm.  

“We are confident in our construction market and I feel that we are starting to see some indicators of settling for some of those supply chain issues,” he said. “It’s going to be very interesting and I will be on the edge of my seat to see how the year unfolds.”

However the later part of the year and going into 2024 could be rough for some parts of the sector, like low density housing. He said watching leading indicators like architectural work and build permit application volumes will be key to see into the future. 

“2024 looks a bit concerning, but we are lucky to be in Vancouver as we have a bit of insulation here compared to the rest of North America,” said Geluch. “Everything is still firing on all cylinders for active construction. We are still building out a backlog from two, three, four years ago.” 

He also highlighted the issue of municipal processing times as something that should be addressed. 

“Bottlenecks and bureaucracy cause problems and it takes years and years to get a project off the ground,” he said. “There have been ambitious statements made by cities and the province to fix this. If that is possible, I don’t know, but it would be timely to do so. It might save us in subsequent years where the market might be soft.” 

On the tech side, Geluch believes the industry is in the midst of its most exciting decade ever as digitization tools like BIM and VDC are becoming more widely adopted. 

“It can allow you to see into the future more tangibly,” he said. “Leveraging digital assets into value propositions is gonna grow and be huge. It will change the way projects are managed. It’s nothing new but people have begun to figure out its true implementation.” 

COWI Canada – (consulting)

Jesse Unke, vice president of COWI in Canada, believes that finding and retaining people will be the biggest issue.

“Going into 2023, I think a lot of my concern on the engineering side is finding and retaining people,” he said. “I think it is still a big concern for myself and my colleagues and people in the industry. If you are in consulting, law, contracting or anything that touches construction, retaining and attracting new staff is going to continue to be a challenge.” 

He added that it’s no longer just a simple formula of compensation or opportunity that people are looking for. Company culture, and approaches to EDI, sustainability, remote working and technology are some factors that are retaining and attracting staff.

“Also, in the back of my mind is if we are really through COVID. Is there going to be another wave?” he said, noting that getting back to in-person, face-to-face meetings has been great for the industry in terms of building relationships and trust. “I would hate to see that taken away from us, but if that happens, we obviously have to do our due diligence to keep our staff safe.”

Unke said supply chains and material costs continue to be a big issue, especially on infrastructure projects. The long lead times and unseen costs negatively impact schedule and costs. 

“Whether it’s vertical or linear construction, it can really hold things up,” he said. “A good example would be climate resiliency work. You can put all the infrastructure in place, but without a critical piece of the project like a pump, you’re out of luck. These are similar things we were concerned about in 2022 and it’s carrying over.” 

He noted that inflation could cause some projects to get shelved or cut back as borrowing power for private clients isn’t as strong. 

On the tech side, increased innovation in technology and digitalization – especially in engineering – such as the transition to and utilization of BIM from traditional CAD, is changing the way business is done.

Gensler – (design)

Steven Paynter, principal at Gensler’s Toronto office, explained that following a pandemic-fueled course correction, the real estate industry continues to face transformational shifts in how buildings will be designed and used. 

“Amid high uncertainty, many of our clients are now focusing on strategic, asset-level decision-making,” he said. “We’ve seen the conversation about office to residential conversions move from the fringes to the mainstream in 2022, and I’m confident that will continue to be a hot topic into 2023.” 

 According to Paynter, in times of uncertainty, quality really reigns supreme.

“We’ll see winners and losers in the different sectors as well as a heightened bifurcation between high quality and low quality assets,” he said. “This trend continues to drive the demand for architects to come to the table as strategic partners to help their clients reposition stranded assets and create places that really lead with experience.”

Pitt Meadows Plumbing and Mechanical Systems – (mechanical)

Steve Robinson, owner of Pitt Meadows Plumbing and Mechanical, is feeling optimistic about the months ahead. 

“We’re probably suffering through all the current industry-wide problems that everybody has been verbalizing,” he said, listing supply chains, pricing challenges and finding adequate labour as the usual suspects. 

“Looking forward, we think the coming year will be significantly better for us from a revenue perspective,” he said. “We have a significant amount of work booked already and we will continue to leverage benefits of off-site construction to ensure that the labour challenges as well as supply challenges don’t affect our productivity or ability to turn your project over to you in the timeframe we told you we would.”

Robinson noted that the company has used unique strategies in the past year that allowed it to continue to optimize its jump into industrialized construction including the purchase of WQC Mechanical.

“We will continue to do synergies similar to that in the future,” said Robinson.

He added that they will also continue to leverage extreme planning and moving as much labour off a job site into their shop environment.

“If you’d talked to us four or five months ago, we saw significant evidence and the traditional pointers for a significant or minimal slowdown,” he said. “But you can’t really have a recession without significant unemployment. It’s as simple as that. And until we start to see significant unemployment, I don’t believe you will see any significant recession of any kind.”

He noted that there are significant initiatives from the province and federal government to build large amounts of homes and improve infrastructure, and immigration targets are set to expand.  

“The slowdown in construction is probably over-reported and may never actually come to fruition anytime in the short term,” he said. “For sophisticated construction service purchasers who understand the value of time and money and whose expectations are high, we will continue to be their provider of choice.”

Procore – (technology)

“Looking ahead to 2023, I expect a year of challenge and change as the Canadian construction industry grapples with ongoing problems such as the labour shortage while continuing to move toward integrated project delivery to achieve greater efficiency,” said Jas Saraw, Procore’s vice president in Canada. “At Procore, we are watching adoption of on-site technologies such as drones and augmented reality with interest, while we also expect further developments in project tools that improve the connection from the field to the back office, and offer predictive insights in order to further drive project efficiency.”

Saraw added that as labour, supply chain and financial constraints put pressure on the industry, there will be accelerated adoption of integrated project delivery to improve efficiency, streamline collaboration between stakeholders and minimize waste.

As the industry continues to digitize, Saraw believes data will become more and more powerful.

“With more contractors moving project information from paper to the cloud, it will be increasingly possible to draw insights from historical data to inform decisions about budgets, scheduling and other aspects of construction,” they said. “AI (Artificial Intelligence) and ML (Machine Learning), will take the complex data and voluminous data that is collected on jobsites and start to make sense of the data in order to drive predictive insights that will allow all project stakeholders to make more effective decisions earlier in the design and build process and ultimately shield themselves from downstream risk as the project schedule progresses.”

505-Junk – (waste/recycling)

Builders want more data – that includes tracking their waste and where it goes.

Barry Hartman, CEO and founder of 505-Junk, said he is seeing an increase in requirements for diversion and an increase in accountability data requested from clients. In the past, data on waste diversion had usually been requested for LEED requirements. 

“Those clients can actually view those metrics and know their waste is being kept out of a landfill and they have evidence,” said Hartman. 

He attributed this shift partly to the rise of online storytelling through social media. 

“What story do construction companies want to tell? Not only is it the right thing to do, it’s a good marketing play as well,” he said. 

505 is following this trend by testing out incentives where they will plant trees on their client’s behalf if more waste is diverted from landfills. 

505 has also found the density of Metro Vancouver and the number of projects have made it challenging to place bins on site. Hartman is finding the demand for live loading is increasing to a point where using cranes to empty self-dumping bins is becoming common.

ATCO Ltd. has acquired Triple M Modular Housing, a leading North American manufacturer of factory-built, modular housing based in Lethbridge, Alta. Triple M will now operate as a specialized housing division for ATCO Structures within Canada.  

“This acquisition boosts ATCO’s status as a global leader and innovator in modular construction, offering our customers a diverse range of modular products from residential to commercial to industrial,” said Adam Beattie, president, ATCO Structures. “Triple M’s ability to deliver affordable, high-quality homes within a short construction timeline is a strategic advantage for us in the current housing market.”

Established in 1981, Triple M is the largest manufacturer of modular residential homes in Western Canada. With more than 300 production employees and an experienced management team, Triple M constructs residential homes and associated products from its 230,000 square foot climate-controlled manufacturing facility. The company has an extensive dealer network in Canada that retails Triple M products to the residential housing market.

The founding business line of ATCO group, ATCO Structures has been in business for 75 years. With manufacturing facilities in Canada, the United States, Mexico, Chile and Australia, ATCO Structures provides global solutions for workforce housing, hotels, medical facilities, schools, multi-family housing and more. ATCO has approximately 6,400 employees and assets of $23 billion.

*Editor’s note: SiteNews is compiling a list of the top modular construction companies for next week. Subscribe so you don’t miss it.

Key Takeaways:

• The global precast concrete market is expected to reach USD $154.89 billion by 2030.
• The major factors driving this growth are urbanization and population growth.
• The Internet of Things and 3D modeling are driving innovation in the sector.

The Whole Story:

Experts are forecasting major growth in the precast concrete market.

The global market reached USD $95.20 billion in revenue in 2021 and is expected to grow to USD $154.89 billion by 2030, according to the latest analysis by Emergen Research. The market is also expected to register a compound annual growth of 5.7 per cent over the forecast period. 

Major companies included in the market report are Larsen & Toubro, Tindall Corporation, Olson Precast Company, STECS, LafargeHolcim, Gulf Precast Concrete Co., Forterra Pipes & Precast, Spancrete, Boral Ltd. and LAING O’Rourke.

Drivers of growth

Emergen noted that the two main factors driving market expansion are rapid urbanization and exponential population growth. 

“Increased demand for non-residential buildings like airports, sports facilities, shopping centers, and commercial spaces will have a significant impact on the supply chain because of the expedited and cost-efficient construction process,” wrote researchers. “Precast concrete will be even more in demand as a result of the growing demand for residential spaces brought on by the expanding population and government programs to build housing for the Economically Weaker Section.”

In addition, the need for improved employment possibilities has increased urbanization efforts, expanding its use in offices and other commercial facilities, stated the report. Residential constructions also employ precast concrete items such as walls, beams, columns, and staircases. Emergen found that these items are in high demand in the building and construction sector because of how simple and quickly they can be constructed. 

“In a variety of weather situations, cast concrete products enable effective and affordable construction,” said the researchers. “These goods are meticulously produced off-site, which raises the level of quality in general. Utilizing pre-casted items dramatically decreases building time, cost, and waste.”

Impacts of COVID-19

The report added that the building and construction sector is expected to be significantly impacted by the COVID-19 pandemic. The epidemic caused the abrupt end of infrastructure development and building activity. The market was hindered by the reduced output of raw materials, interruptions in the supply chain, limitations on the movement of people and goods, and problems with trade movements. 

“The epidemic has resulted in an oversupply of precast materials,” noted researchers. “In addition, precast concrete is fragile like other concrete materials. If in any instance precast concrete is not handled properly, components can be quickly damaged.”

They explained that because of this it’s vital to set up certain tools and procedures to protect the goods. What matters most, in this case, is the transit process. Care should be taken during the lifting and transporting stages to avoid any unforeseen circumstances. Precast concrete is very versatile, but because of its robust and enduring structural behavior, building each piece is rather difficult. In order to maintain everything correctly connected, the connections formed should be continuously monitored and should assure durability. Faulty connections could cause sound insulation to fail or cause water leaks.

Current Trends and Innovations

Internet of Things (IoT) is a hot topic in the sector. The newest technologies already make it possible to identify production bottlenecks and the need for preventative maintenance. IoT is used to process data, such as produced square meters, the speed of the machine and screws, and the quality of the casting, to decide the best time for maintenance. To maximize the length of a maintenance break and reduce production disturbance, these variables can be changed specifically for each facility and machine. Precast concrete 3D models are currently used successfully by designers in many different sectors.

For instance, when their models are available in 3D format, architects and structural designers may more effectively communicate their ideas, explained researchers. Precast plants follow the same rules. Evaluation of the space and safety requirements is made simpler by 3D industrial models. 3D models aid in the analysis of approaches to increase safety and usefulness in machine development. Additionally, it is simpler to identify any particular requirements when engineers have the opportunity to view a product in 3D prior to its manufacturing.

Ontario’s property inventory continued to grow in 2022, with more than $37.8 billion in new assessments, which includes new construction and improvements to existing properties. According to the Municipal Property Assessment Corporation (MPAC), residential homes made up over $28.6 billion of the increase, while commercial and industrial properties comprised $4.6 billion.

The assessed value of Ontario’s 5.5 million properties is now estimated to be more than $3.08 trillion. MPAC summarizes these changes in the annual assessment rolls that they delivered to Ontario’s municipalities.

Condos slow down

Over the course of the year, Ontario added more than 48,000 residential homes. While the number of new detached homes increased 10.5 per cent year over year (25,727, up from 23,279), the number of new residential condominiums dropped by 37.4 per cent (7,097, down from 11,331). There was also a small increase in new townhouses, coming in at approximately 1.3 per cent (10,484, up from 10,350).

“The slowdown we see in new residential condominiums is attributed to construction delays arising from changing economic considerations and supply issues,” said Nicole McNeill, MPAC’s president and CEO. “Despite this slowdown in new residential condominiums, we did see year-over-year growth in other property types.”

10 municipalities key to growth

Across Ontario, more than 55 per cent of new property value was located in 10 municipalities. Toronto led the way for another year at $8.7 billion (down from $10.7 billion in 2021) followed by Ottawa at $4.4 billion (up from $3 billion), then Mississauga at $1.2 billion (down from $1.6 billion), Vaughan at $1.1 billion (down from $2 billion), and Oakville at $1.1 billion (holding steady) for another year.

When looking at the growth rates for small municipalities (under 15,000 population), Blue Mountains had the largest overall growth this year ($140.2 million) despite a drop in new seasonal properties from the previous year (down to $29.3 million from $32.7 million). Muskoka Lakes followed with $120.3 million, then Middlesex Centre with $103.7 million, North Perth with $90.9 million and Carleton Place with $89.9 million.

Key Takeaways:

• The Quintette coal mine in northeastern B.C. has been sold to Conuma by Teck for $120M.
• The mine has been on care and maintenance since 2000.
• The coal produced by the mine is used to create steel.

The Whole Story:

A dormant B.C. mine site is getting a new lease on life. 

Teck Resources Limited announced that it has agreed to sell the Quintette steelmaking coal mine in northeastern British Columbia to a subsidiary of Conuma Resources Limited. Conuma will pay Teck $120 million in cash in staged payments over the next 36 months, and an ongoing 25 per cent net profits interest royalty, first payable after Conuma recovers its investment in Quintette.

Closing of the transaction, expected to occur in the first quarter of 2023, is subject to receipt of regulatory approvals and other customary conditions.

The steelmaking coal mine, which produced a semi-hard coking coal product, operated for nearly 18 years up until 2000 and has been on care and maintenance since then. Steelmaking coal is a vital ingredient in the production of steel, which is essential for low-carbon infrastructure such as rapid transit, transmission systems and wind turbines.

Founded in mid-2016, Conuma Resources is a steelmaking coal producer based in Northeast B.C. Conuma’s surface mine operations at Brule, Wolverine and Willow Creek have a rated capacity to produce more than 5 million tonnes of steelmaking coal annually, and provide more than 900 direct and 3,000 indirect jobs in the Peace River Regional District.

Key Takeaways:

• CDPQ is investing $150 million in Pomerleau on top of $50 million it invested in 2018. 
• The firm’s investments helped Pomerleau acquire residential builder ITC Construction Group earlier this year. 
• Pomerleau says it plans to use the acquisition and investments to expand its residential offerings across Canada. 

The Whole Story:

Pomerleau is getting a massive new investment from one of its strategic partners as it looks to expand.

CDPQ announced it will invest an additional $150 million in Pomerleau to accelerates its growth in Canada. The global investment group’s support played a significant role in Pomerleau’s acquisition of Vancouver-based residential builder ITC Construction Group earlier this year. 

“We are proud that the CDPQ is extending its commitment to our 4,000 people, our values and our growth strategy,” said Pierre Pomerleau, Pomerleau president and CEO. “CDPQ is an outstanding partner and shareholder, and we are delighted that this renewed confidence can support the deployment of our strategic plan.”

CDPQ officials noted that so far their investment strategy has paid off big. The firm invested $50 million into Pomerleau in 2018. Since then, the construction company has more than doubled its revenues from $1.8 billion to $4 billion, and more than tripled its order backlog from $3.5 billion to $11 billion. Founded 60 years ago in the Beauce region of Québec, Pomerleau’s Canadian projects outside of Quebec now account for almost 50 per cent of its revenues.

“CDPQ is proud to have been at the company’s side during this expansion and looks forward to continuing our commitment to support the execution of the company’s strategic development plan,” said Kim Thomassin, executive vice-president and head of Québec at CDPQ. “In addition to fostering the organization’s expansion across Canada with the ITC Construction Group acquisition, this investment is aligned with our desire to develop more sustainable living environments, and Pomerleau continues to play a major role in that regard.”

The acquisition of ITC was the largest in Pomerleau’s history. The company says it plans to use it to provide sustainable and innovative housing solutions across the country. ITC has 200 residential projects worth more than 5 billion dollars under its belt in B.C. and Alberta, and 18 major residential projects underway.

“Over time, Pomerleau has become more than a construction company,” said Pomerleau. “Today, it structures alternative and collaborative models of delivery and financing. This allows us to tackle a wide range of increasingly complex projects – from hospitals to industrial facilities, wind farms and light-rail transit. We are also proud to offer much-needed solutions to Canadians, including low-carbon buildings as well as public transit and renewable energy infrastructure that help tackle climate change and improve the quality of life.”

The future of technology and energy requires critical minerals and Canada has released its plan to secure them.

This month, the federal government released the Canadian Critical Minerals Strategy, a plan to establish and maintain resilient critical minerals value chains that adhere to the high ESG standards. 

“There is no energy transition without critical minerals: no batteries, no electric cars, no wind turbines and no solar panels,” wrote Jonathan Wilkinson, minister of natural resources. “The sun provides raw energy, but electricity flows through copper. Wind turbines need manganese, platinum and rare earth magnets. Nuclear power requires uranium. Electric vehicles require batteries made with lithium, cobalt and nickel and magnets. Indium and tellurium are integral to solar panel manufacturing.”

Canada is also in a unique global position. It is home to almost half of the world’s publicly listed mining and mineral exploration companies, with a presence in more than 100 countries and a combined market capitalization of $520 billion.

The strategy, backed by nearly $4 billion in Budget 2022, envisions Canada as a global supplier of choice for critical minerals.

But what does the strategy mean for builders? Here are five major takeaways:

1. We have to get better at finding minerals

Locating critical minerals in Canada’s vast landmass is a complex endeavor. It requires advanced geoscience capabilities, including geological mapping, geophysical surveying, and scientific assessments and data.

Ottawa plans to spend $79.2 million for public geoscience and exploration to better identify and assess mineral deposits. They also want to offer a 30 per cent Critical Mineral Exploration Tax Credit for targeted critical minerals. $47.7 million will be spent on targeted upstream critical mineral R&D through Canada’s research labs and $144.4 million will go towards critical mineral research and development, and the deployment of technologies and materials to support critical mineral development for upstream and midstream segments of the value chain.

2. Projects need to speed up

It takes anywhere from 5 to 25 years for a mining project to become operational, with no revenue until production starts. The federal government says that’s not good enough so they are looking to accelerate the development of strategic projects.

Ottawa is pouring $1.5 billion into the Strategic Innovation Fund (SIF), one of the most significant direct funding mechanisms in the entire strategy. Officials say the SIF will help build world-class critical mineral value chains in which prefabrication and manufacturing activities are done domestically by default. It will support projects that decrease or remove reliance on foreign critical mineral inputs across a range of priority industrial sectors or technologies. SIF investments will favour critical mineral development opportunities that aim to reduce GHG emissions in critical mineral and manufacturing sectors.

Officials also plan to spend $21.5 million to support the Critical Minerals Centre of Excellence (CMCE) to develop federal policies and programs on critical minerals and to assist project developers in navigating regulatory processes and federal support measures.

3. Sites need to be accessible and supported

Critical mineral deposits are often located in remote areas with challenging terrain and limited access to enabling infrastructure such as roads or grid connectivity. Officials say the cost implications of this infrastructure deficit discourage investment and hinder the socio-economic development of local communities that welcome mineral development. It also increases the risks associated with economic and logistical feasibility, particularly with rising inflationary pressures and challenges in global supply chains.

Ottawa is proposing $1.5 billion for infrastructure development for critical mineral supply chains, with a focus on priority deposits. They also want to make strategic infrastructure investments in green energy and transportation to unlock critical mineral regions, while also improving environmental performance and driving emissions reductions in existing operations through electrification.

4. A lot more workers are needed

Mining experts anticipate that up to 113,000 new workers will be needed by 2030 to meet new demand and replace those workers anticipated to exit the mining workforce. Sound familiar?

The strategy aims to continue supporting a plethora of existing programs that target diverse groups, including: Sectoral Workforce Solutions Program, the Indigenous Skills and Employment Training Program, and the Skills and Partnership Fund, Canada Summer Jobs, Rural and Northern Immigration Pilot.

Officials are also looking for partnership opportunities with provinces and territories, Indigenous-led organizations, and several stakeholders, including universities, colleges, and specialized training institutions, to create greater awareness and understanding of the minerals and metals sector, sometimes referred to as mineral literacy. These partnerships would encourage enrolment in mining curriculum, skilled trades, and by socializing the role critical minerals play in the green energy transition and showcasing the diversity of careers available in the sector.

5. Indigenous people must be included

Indigenous peoples are the stewards, rights holders, and in many cases, title holders to the land upon which mineral resources are located. Historically, Indigenous peoples have not always benefited from natural resource development on their traditional territories, and some developments have caused adverse environmental and social impacts on communities.

But federal officials say that in the past few decades, Indigenous participation in the mining sector has grown significantly.

Ottawa is allocating $103.4 million to advance economic reconciliation through enhanced readiness to meaningfully participate in the natural resource sector, including at least $25 million to support Indigenous participation and early engagement in the strategy. Funding is available through the Indigenous Natural Resource Partnerships Program, which funds activities that help increase the economic participation of Indigenous peoples in natural resource projects. The Program is accessible to Indigenous communities, businesses, and organizations.

Key Takeaways:

• The Bank of Canada raised the rate 50 basis points to 4.25 per cent, the seventh rate hike this year.
• The hike was bigger than many experts anticipated.
• Their latest data put CPI inflation at 6.9 per cent.

The Whole Story:

The rate hikes keep coming. 

The Bank of Canada announced that it has increased its target for the overnight rate to 4.25 per cent, with the Bank Rate at 4.50 per cent and the deposit rate at 4.25 per cent. The bank is also continuing its policy of quantitative tightening. It’s the seventh rate hike this year. 

Bank officials explained that inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report (MPR). In the U.S., the economy is weakening but consumption continues to be solid and the labour market remains overheated. The gradual easing of global supply bottlenecks continues, although further progress could be disrupted by geopolitical events.

According to the bank, Canada’s third quarter GDP growth was stronger than expected, and the economy continued to operate in excess demand. Officials explained that Canada’s labour market remains tight, with unemployment near historic lows.

“While commodity exports have been strong, there is growing evidence that tighter monetary policy is restraining domestic demand: consumption moderated in the third quarter, and housing market activity continues to decline,” said the bank in a press release. “Overall, the data since the October MPR support the bank’s outlook that growth will essentially stall through the end of this year and the first half of next year.”

Their data shows that CPI inflation remained at 6.9 per cent in October, with many of the goods and services Canadians regularly buy showing large price increases. Measures of core inflation remain around 5 per cent. 

“Three-month rates of change in core inflation have come down, an early indicator that price pressures may be losing momentum,” said the bank. “However, inflation is still too high and short-term inflation expectations remain elevated. The longer that consumers and businesses expect inflation to be above the target, the greater the risk that elevated inflation becomes entrenched.”

Bank officials said they will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target. 

“We are resolute in our commitment to achieving the 2 per cent inflation target and restoring price stability for Canadians,” officials said. 

The hike was higher than expected by some experts, who anticipated a 25 basis points rather than 50. Commercial real estate firm Avison Young did not expected the larger hike due to recent signs that domestic demand, earnings growth and core inflation are starting to ease. 

“Third quarter GDP data came in stronger than expected, and the labour market remains tight with the unemployment rate falling marginally last month,” said Nick Axford, Avison Young’s chief economist. “This probably tipped the balance to go for a larger increase in policy rates in what must have been a tight decision.” 

Axford explained that the accompanying forward guidance suggests that rates may well now have peaked, however he believes another 25 basis point hike could come in January, depending on what the data show.

“Interest rates should therefore stabilise early in 2023, if they have not done so already – provided that inflation starts to move sustainably downwards from the early part of next year,” said Axford. “Rates may even start to fall later in 2023 – again, very dependent on the data. In the meantime, the latest increase coupled with the quantitative tightening that is also underway represents a significant tightening of financial conditions, which will restrict the flow of credit in the economy.”

He believes this will act as a further constraint on the commercial real estate sector and housing market, impacting both pricing and transaction volumes.

Canada’s unions were not pleased by the hike which they say could lead to the loss of jobs and homes. 

“Economists have urged the Bank of Canada to let the impact of previous rate hikes take hold before taking further action that could risk causing a damaging recession. It’s regrettable the Bank of Canada rejected that advice,” said Bea Bruske, president of the Canadian Labour Congress. “Moving ahead on another rate hike today could mean hundreds of thousands of workers losing their jobs and families losing their homes. There is a better way.”

Bruske argued that wage growth is being unfairly blamed for the country’s economic woes and the bank’s attention should be shifted elsewhere. 

“Central banks raise rates to cool the economy and lower inflation. But the Bank of Canada has gone further and has waged a public relations campaign warning about the phantom menace of higher wages,” continued Bruske. “There is simply no evidence of this. Real wages are down more than 5 pe rcent over the past two years and continue to lag behind inflation. Meanwhile, corporate profits have ballooned to record levels. It is time for a more balanced policy approach.”

Bruske urged the government to take action against price gouging, including an excess profits tax on corporations. 

Burnaby is in the midst of a construction boom that is destroying records.  

The latest data from the city shows it continues to set a record pace for construction. Earlier this month it surpassed $2 billion worth of building permits so far in 2022, smashing all previous full-year records.

“During the COVID-19 pandemic when much of the world went on pause, our staff worked hard to continue to process permits and applications, carry out inspections, and establish the master plans that will guide Burnaby’s future development,” said Mayor Mike Hurley. “This report shows that our approach is generating real results – we’re building much-needed new homes and helping to drive economic growth in Burnaby.”

As of November 15, the city has issued 1,133 building permits for a value of $2.105 billion – already a substantial increase over the annual (full year) totals over the last five years. Last year’s total building permit value was $1.02 billion and the year before that it was $1.45 billion.

The city attributed some of its success to innovative housing policies. They noted that these policies are also driving the creation of a record amount of rental housing in Burnaby, with more than 12,000 units of rental housing now being built or in the development stream. The city added that more non-market rental units are being built than market rentals – a first for the city.

Burnaby building permit value totals:

• 2022 (to Nov. 15) 1,133 permits – $2.105 billion
• 2021 1,095 permits – $1.02 billion
• 2020 1,007 permits – $1.45 billion
• 2019 1,116 permits – $1.22 billion
• 2018 1,520 permits – $1.69 billion
• 2017 1,649 permits – $1.05 billion

Alberta construction leaders believe the province is making an effort to address major concerns in the premier’s latest mandate letters to ministers. 

The Alberta Construction Association (ACA) stated that Premier Danielle Smith’s recent direction to ministers is a solid step towards addressing long standing and emerging issues in Alberta’s construction industry. The ACA explained that the ministerial mandate letters across Government address key issues for Alberta’s contractors. 

Highlights include:

• Sustained infrastructure investment including a focus on trade corridors.
• Best value procurement and standardized contracts to reduce risk.
• Extending prompt payment provisions to Government of Alberta contracts.
• Promoting trades education, working training, recognition of out of province credentials, fostering opportunities for people from under-represented communities, and expanded Provincial Nominee Program.
• Continued red tape reduction with an emphasis on streamlined permitting and Land Titles processes.
• Complete Occupational Health & Safety Code review and more focus on mental health supports to keep workers safe.
• Review Building Code changes to ensure safety and affordability.

The Alberta Construction Association and the province’s regional construction associations offered their expertise to partner with the government to rapidly implement the directions. They added that numerous meetings with ministers are imminent to advance the work.  

Key Takeaways:

• Inflation continues to be an issue domestically and abroad.
• Global growth is expected to slow in 2023 but perk up in 2024.
• The bank expects that the policy interest rate will need to rise further.

The Whole Story:

Interest rates in Canada have once again gone up. 

The Bank of Canada announced it has increased its target for the overnight rate to 3.75 per cent, with the bank rate at 4 per cent and the deposit rate at 3.75 per cent. 

During the height of the COVID-19 pandemic, the bank chopped the lending rate to almost nothing but has hiked its benchmark rate six times since March.

Bank officials noted that they also intend to continue their policy of quantitative tightening.

Inflation outside Canada is still high

“Inflation around the world remains high and broadly based,” stated bank officials in their rate hike announcement. “This reflects the strength of the global recovery from the pandemic, a series of global supply disruptions, and elevated commodity prices, particularly for energy, which have been pushed up by Russia’s attack on Ukraine. The strength of the US dollar is adding to inflationary pressures in many countries. Tighter monetary policies aimed at controlling inflation are weighing on economic activity around the world. As economies slow and supply disruptions ease, global inflation is expected to come down.”

Bank officials noted that labour markets in the U.S. remain very tight even as restrictive financial conditions are slowing economic activity. The bank projected no growth in the U.S. economy through most of next year. 

“In the euro area, the economy is forecast to contract in the quarters ahead, largely due to acute energy shortages,” said the bank. “China’s economy appears to have picked up after the recent round of pandemic lockdowns, although ongoing challenges related to its property market will continue to weigh on growth.”

Growth is expected to slow

Overall, the bank projects that global growth will slow from 3 per cent in 2022 to about 1.50 per cent in 2023, and then pick back up to roughly 2.50 per cent in 2024. This is a slower pace of growth than was projected in the Bank’s July Monetary Policy Report (MPR).

“In Canada, the economy continues to operate in excess demand and labour markets remain tight,” noted the bank. “The demand for goods and services is still running ahead of the economy’s ability to supply them, putting upward pressure on domestic inflation. Businesses continue to report widespread labour shortages and, with the full reopening of the economy, strong demand has led to a sharp rise in the price of services.”

Bank officials explained that the effects of recent policy rate increases are becoming evident in interest-sensitive areas of the economy: housing activity has retreated sharply, and spending by households and businesses is softening. Also, the slowdown in international demand is beginning to weigh on exports. Economic growth is expected to stall through the end of this year and the first half of next year as the effects of higher interest rates spread through the economy. The Bank projects GDP growth will slow from 3.25 per cent this year to just under 1 per cent next year and 2 per cent in 2024. 

Higher rates could help rebalance economy

In the last three months, CPI inflation has declined from 8.1 per cent to 6.9 per cent, primarily due to a fall in gasoline prices. However, price pressures remain broadly based, with two-thirds of CPI components increasing more than 5 per cent over the past year. The bank noted that its preferred measures of core inflation are not yet showing meaningful evidence that underlying price pressures are easing. 

“Near-term inflation expectations remain high, increasing the risk that elevated inflation becomes entrenched,” officials said.

The bank expects CPI inflation to ease as higher interest rates help rebalance demand and supply, price pressures from global supply disruptions fade, and the past effects of higher commodity prices dissipate. CPI inflation is projected to move down to about 3 per cent by the end of 2023, and then return to the 2 per cent target by the end of 2024.

“Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the governing council expects that the policy interest rate will need to rise further,” officials said. “Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to restore price stability for Canadians and will continue to take action as required to achieve the 2 per cent inflation target.”

Inflation to worsen before improving

Experts at Avison Young, a global real estate firm, believe inflation is likely to get worse before it gets better and believe more modest rate increases could be on the way.

“The Bank of Canada is leading the charge by global central banks in raising interest rates to tackle inflation and had already aggressively raised rates by 300 bps this year prior to their latest announcement,” said Nick Axford, principal and chief economist at the firm. “The housing market is slowing sharply and growth across the economy as a whole has effectively come to a halt, with a recession now looking likely in the early part of 2023.

Axford explained that despite this, consumer spending remains robust and the labour market is still tight.

“Headline inflation has stabilised for now, but at around 7 per cent this is uncomfortably high – and is likely to rise again before it declines,” he said. “As a result, the Bank continues to focus on preventing a wage-price spiral and remains concerned about the high level of core inflation.” 

Rate hike to restrict credit flow

Axford noted that the rate increase was well above the bank’s estimate of the “neutral” rate of 2-3 per cent.

“This was below consensus expectations of a 75bps rise, given the strength of the latest consumer and retail sales data,” he said. “Looking ahead, we expect rates to be pushed up further, but in more modest increments with one or two 25bps hikes over the coming months. Markets are pricing a peak for rates at just below 4.5 per cent, sensing that the Bank will be reluctant to push beyond this level until they have seen the impact of previous rises.

According to Axford, these impacts likely won’t be broadly felt through the economy for 12 to 18 months. He believes interest rates should stabilise early in 2023 – provided that inflation starts to move sustainably downwards from the early part of next year.

“In the meantime, the latest increase coupled with the quantitative tightening that is also underway represents a significant tightening of financial conditions, which will restrict the flow of credit in the economy,” said Axford. “This will act as a further constraint on the commercial real estate sector and housing market, impacting both pricing and transaction volumes.”

Key Takeaways:

• The changes are expected to make it easier, faster and cheaper to build housing.
• Officials also want to encourage more rental and affordable housing construction.
• Ontario is also looking to crack down on unethical builders, land speculators, empty homes and foreign buyers.

The Whole Story:

Ontario is looking to turbocharge home construction with new legislation.

This month the province unveiled legislation that, if passed, would support Ontario’s newest Housing Supply Action Plan, More Homes Built Faster. 

Officials explained that the plan is part of a long-term strategy to increase housing supply and address housing affordability.

“For too many Ontarians, including young people, newcomers, and seniors, finding the right home is still too challenging. This is not just a big-city crisis: the housing supply shortage affects all Ontarians, including rural, urban and suburban, north and south, young and old,” said Steve Clark, minister of municipal affairs and housing. “Our Housing Supply Action Plan is creating a strong foundation on which 1.5 million homes can be built over the next 10 years. Our government is following through on our commitment to Ontarians by cutting delays and red tape to get more homes built faster.”

Addressing the missing middle

Ontario is proposing changes to the Planning Act to create a new provincewide standard threshold for what’s allowed to be built by strengthening the additional residential unit framework. If passed, up to three residential units would be permitted “as of right” on most land zoned for one home in residential areas without needing a municipal by-law amendment. Depending on the property in question, these three units could all be within the existing residential structure or could take the form of a residence with an in-law or basement suite and a laneway or garden home. Officials noted that these new units must be compliant with the building code and municipal bylaws. These units would also be exempt from development charges and parkland dedication fees.

Building more homes near transit

Proposed changes to the Planning Act would help move towards “as-of-right” zoning to meet planned minimum density targets near major transit stations, reducing approval timelines and getting work started faster. Once the key development policies for major transit stations are approved, municipalities would be required to update their zoning by-laws within one year to meet minimum density targets.

Supporting affordable and rental housing

The province is proposing regulatory changes to provide certainty regarding inclusionary zoning rules, with a maximum 25-year affordability period, a five per cent cap on the number of inclusionary zoning units, and a standardized approach to determining the price or rent of an affordable unit under an inclusionary zoning program.

Officials also want to help streamline the construction and revitalization of aging rental housing stock. As it stands, under the Municipal Act and City of Toronto Act, municipalities may enact bylaws to prohibit and regulate the demolition or conversion of multi-unit residential rental properties of six units or more. These by-laws vary among municipalities and can include requirements that may limit access to housing or pose as barriers to creating housing supply. Ontario plans to begin consultations on potential regulations to enable greater standardization of these municipal by-laws, while ensuring that renter protections and landlord accountabilities remain in place.

Building attainable, affordable and non-profit housing

Officials stated that government charges and fees significantly impact the cost of housing – adding up to nearly $200,000 to the overall cost of building a home. Changes to the Planning Act, the Development Charges Act and the Conservation Authorities Act would freeze, reduce and exempt fees to spur the supply of new home construction. This includes ensuring affordable, and inclusionary zoning units, select attainable housing units, as well as non-profit housing developments, are exempt from municipal development charges, parkland dedication levies, and community benefits charges. Rental construction would also have reduced development charges and conservation authority fees for development permits and proposals would be temporarily frozen. Ontario is also undertaking a review of all other fees levied by provincial ministries, boards, agencies and commissions to determine what impact they may have on the cost of housing with the intent of further reducing, if not eliminating these fees altogether.

Streamlining processes

Proposed changes to the Planning Act would remove site plan control requirements for most projects with fewer than 10 residential units with some limited exceptions. Officials expect this to reduce the number of required approvals for small housing projects, speeding things up for all housing proposals, while building permits and robust building and fire code requirements would continue to protect public safety. Proposed streamlining changes also include focusing responsibility for land use policies and approvals in certain lower-tier municipalities to eliminate the time and costs associated with planning processes by upper-tier municipalities. The province explained that this would give the local community more influence over decisions that impact them directly, clarifying responsibilities and improving the efficiency of government services for citizens.

Improving the Ontario land tribunal 

Proposed legislative changes to the Ontario Land Tribunal Act are expected to speed up proceedings, resolve cases more efficiently and streamline processes. This includes allowing for regulations to prioritize cases that meet certain criteria , as well as to establish service standards. Proposed changes would also clarify the Tribunal’s powers to dismiss appeals due to unreasonable party delay or party failure to comply with a Tribunal order, as well as clarify the Tribunal’s powers to order an unsuccessful party to pay the successful party’s costs. Ontario would also invest $2.5 million in other resources to support faster dispute resolution and to help reduce the overall caseload at the Tribunal.

Creating an attainable housing program

Ontario plans to create a new program to support home ownership. The new program will leverage provincial authorities, surplus or underutilized lands, and commercial innovation and partnerships to rapidly build attainable homes in mixed-income communities that are accessible to all and will help families to build portable equity.

Protecting homebuyers

Ontario intends to double maximum fines for unethical builders and vendors of new homes who unfairly cancel projects or terminate purchase agreements. These proposed changes under the New Home Construction Licensing Act, would, if passed, increase existing maximum financial penalties from $25,000 to $50,000 per infraction, with no limit to additional monetary benefit penalties, and be retroactively imposed for contraventions that occurred on or after April 14, 2022. These changes would also enable the Home Construction Regulatory Authority to use funds from these penalties to provide money back to affected consumers, making Ontario the first jurisdiction in Canada to provide such funds to consumers. If passed, the amendments would come into force in early 2023.

Combatting land speculation

In January, during the Ontario-Municipal Housing Summit, Ontario’s mayors expressed concerns that lands planned for residential development are sitting empty because home builders are taking too long to complete their planning applications, delaying the creation of new homes. Ontario plans to work with industry partners to investigate the issue of land speculation and determine whether potential regulatory changes under the New Home Construction Licensing Act are needed.

Improving heritage and growth planning

Proposed changes to the Ontario Heritage Act would renew and update Ontario’s heritage policies and strengthen the criteria for heritage designation and update guidelines. Officials believe this would promote sustainable development that conserves and commemorates key places with heritage significance and provide municipalities with the clarity and flexibility needed to move forward with priority projects, including housing. Ontario will be consulting on how it manages natural heritage, including improving the management of wetlands, while supporting sustainable growth and development. Ontario will be seeking input on integrating A Place to Grow: Growth Plan for the Greater Golden Horseshoe and the Provincial Policy Statement into a single, provincewide planning policy document. This review will also include consultation on how to address overlapping planning policies that could negatively impact precision in mapping and municipal planning.

Reducing taxes on affordable rental housing

The province is asking the federal government to partner with them on potential GST/HST incentives, including rebates, exemptions and deferrals, to support new ownership and rental housing development. 

Changing property tax for affordable and rental housing

Currently, property tax assessments for affordable rental housing are established using the same basis as regular market rental properties. Ontario plans to explore potential refinements to the assessment methodology used to assess affordable rental housing so that it better reflects the reduced rents that are received by these housing providers.

In addition, Ontario will consult with municipalities on potential approaches to reduce the current property tax burden on multi-residential apartment buildings in the province.

Addressing vacant homes

This winter, the province plans to conduct consultation on a policy framework setting out the key elements of local vacant home taxes. Officials noted that currently only a handful of municipalities have the authority to charge this tax on unoccupied residential units to incentivize owners to sell or rent them out. A provincial-municipal working group will be established to consult on this framework, and to facilitate sharing information and best practices.

Strengthening the Non-Resident Speculation Tax

At 25 per provincewide, Ontario noted that it now has the highest and most comprehensive Non-Resident Speculation Tax (NRST) in the country. This initiative is meant to further discourage foreign speculation in Ontario’s housing market.

Key Takeaways:

• Institutional construction investment in B.C. has dropped nearly 11 per cent while labour and material costs have continued to rise.
• The industry is seeing its lowest unemployment rate since 1976 and the number of trades people has dropped five per cent during the past three years.
• Contractors continue to see payment delays of 90-120 days.

The Whole Story:

The BC Construction Association is calling their latest batch of data a reversal of fortunes that shows heavy pressure on the construction sector.  

The statistics reported in the Fall 2022 BC Construction Association (BCCA) Industry Stat Pack, combined with findings from a new economic and policy report published this month by the organization, show a difficult road being tread by the province’s builders. 

The complete Stat Pack, Economic Report from Sage Policy Group and more information can be found here.

High costs and declining demand

Investment in B.C.’s industrial, commercial, and institutional (ICI) construction sectors is down 10.9 per cent since February 2020, while the non-residential building price index spiked 19.6 per cent.

Rising prices led to the largest industry in B.C.’s goods sector growing 10 per cent in dollar value despite the decrease in demand, contributing 9.7 per cent of provincial GDP. Construction has seen a massive 80 per cent increase in the value of current projects compared to five years ago.

The BCCA noted that contractors are struggling to balance declining commercial demand with rising costs of materials and labour, even as waning procurement standards on public sector projects add to project risk.

“The construction industry is massive, essential, and struggling”

BCCA President Chris Atchison

B.C. is also seeing its lowest construction unemployment rate since 1976 at 5.7 per cent, with the competition for talent sending average construction skyrocketing 26 per cent since 2017 and 11 per cent since last year alone. The 2022 jump includes a 2 per cent increase due to the 5 days mandatory paid sick leave legislated this past January.

Prompt payment still elusive 

The BCCA also expressed frustration that the provincial government has yet to deliver on prompt payment legislation. They noted that contractors regularly wait 90-120 days to be paid, put them in extreme financial jeopardy.

“Waiting to be paid is getting even more expensive” said Chris Atchison, BCCA president. “Slow payment for services rendered is unique to our industry, and with costs of goods, labour, and borrowing all rising, many BC contractors are reaching crisis.  Prompt payment legislation is not experimental, it is proven. Unlocking cash flow is an economic necessity and in the best interests of every community in BC.”

Labour grows more scarce 

According to BCCA data, the number of ICI construction companies in B.C. has grown to 26,262 but the number of tradespeople in the industry has dropped 5 per cent over three years. The average company size has shrunk 7 per cent over the last three years to an average of 6.53 workers.

Women comprise 5.7 per cent of tradespeople, an increase of 24 per cent since 2017 but a year-over-year decrease of 8 per cent.

“The construction industry is massive, essential, and struggling” said Atchison.  “Make no mistake: many employers are reaching a breaking point. The urgent need for more housing and other infrastructure development hangs in the balance.”

Key Takeaways:

• RBC Bank expects a moderate recession to hit in the first quarter of 2023.
• If inflation can’t slow sustainably, more rate hikes could come and the recession could deepen.
• The manufacturing sector will likely be the first to pull back when the recession hits.

The Whole Story:

A moderate recession could creep into Canada sooner than expected.

The Royal Bank of Canada (RBC) believes that the downturn could hit as early as the first quarter of next year. 

Previously, the bank projected a moderate recession for Canada’s economy in the second quarter of 2023. They now believe this downturn will arrive as early as the first quarter of next year.

RBC added that higher prices and interest rates will trim $3,000 off the average household’s purchasing power, weighing on goods purchases.

The bank expects the jobless rate to approach 7 per cent while remaining less severe than in previous downturns.

RBC experts added that as debt-servicing costs increase and purchasing power declines, lower income Canadians – many already adjusting to the loss of pandemic support – will be hit hardest.

One of the main points RBC made was that no matter when the recession hits, it won’t be felt equally by all. 

“The manufacturing sector will likely be among the first to pull back while some high-contact service sectors like travel and hospitality could prove more resilient than in a ‘normal’ historical recession,” wrote RBC experts.

The bank noted that they have already seen cracks forming in the economy, including a sharply cooled housing market and an aggressive rate-hiking cycle by central banks. RBC added that while labour markets remain strong, employment is down by 92,000 over the last four months.

“While the Bank of Canada is expected to lift the overnight rate to 4 per cent, the U.S. Federal Reserve will likely hike to between 4.5 per cent and 4.75 per cent by early 2023,” wrote bank experts. “These factors will hasten the arrival of a recession in Canada.”

RBC experts explained that what happens next will depend on a range of factors, with interest rate increases the most significant among them. 

“Central banks will be reluctant to throw in the towel on rate hikes before they are confident that inflation will slow sustainably,” they wrote. “We expect the Bank of Canada to pause its rate-hiking cycle in late 2022 followed by the Fed in early 2023.”

They noted that this is contingent on inflation pressures easing. 

“More stubborn inflation trends over the coming months could yet prompt additional hikes, and a potentially larger decline in household consumption and a deeper recession,” they added.

Key Takeaways:

• The $1.12 billion deal gives 23 First Nation and Métis groups partial non-operating interest in seven Enbridge pipelines.
• The investment will be guided by newly created entity, Athabasca Indigenous Investments.
• Closing of the transaction is expected to occur within the next month.

The Whole Story

Enbridge has inked a $1.12 billion agreement with 23 First Nation and Métis communities for them to collectively acquire an 11.57 per cent non-operating interest in seven Enbridge-operated pipelines in the Athabasca region of northern Alberta.

The agreement also creates Athabasca Indigenous Investments (Aii), which is tasked with guiding the investment. Aii now represents the largest energy-related Indigenous economic partnership transaction in North America ever.

“We are very pleased to be joining our Indigenous partners in this landmark collaboration,” said Al Monaco, president and CEO of Enbridge. “We believe this partnership exemplifies how Enbridge and Indigenous communities can work together, not only in stewarding the environment, but also in owning and operating critical energy infrastructure. We are looking forward to working with the Aii and deepening our relationship well into the future. This also fully aligns with our priority to recycle capital at attractive valuations, which can be used to fund numerous growth opportunities within our conventional and low carbon platforms.”

Pipelines included in the transaction are the Athabasca, Wood Buffalo/Athabasca Twin and associated tanks; Norlite Diluent; Waupisoo; Wood Buffalo; Woodland; and the Woodland extension. Enbridge added that these assets are underpinned by “long-life resources and long-term contracts”, which provide highly predictable cash flows.

Enbridge noted that the agreement stems from commitments it made in its recently released Indigenous Reconciliation Action Plan (IRAP). The IRAP incorporates advice into facility siting, environmental and cultural monitoring, employment, training and procurement opportunities and, most recently, financial partnerships such as the proposed Wabamun Carbon Hub.

“On behalf of the Indigenous partners, we are proud to become equity owners in these high-quality assets which contribute to North American energy supply and security,” said Justin Bourque, president of Aii. “Our partner logo theme – Seven Pipelines, Seven Generations – speaks to the long-term value potential of these assets, which will help enhance quality of life in our communities for many years to come.”

Chief Greg Desjarlais of Frog Lake First Nation, called the agreement a historic day for Indigenous people in the Athabasca region.

“In addition to an opportunity to generate wealth for our people, this investment supports economic sovereignty for our communities,” he said. “We look forward to working with a leading energy company like Enbridge, which shares Indigenous values of water, land and environmental stewardship.”

Closing of the transaction is expected to occur within the next month. BMO Capital Markets acted as financial advisor to Enbridge and Torys LLP as legal counsel. RBC Capital Markets acted as financial advisor to Athabasca Indigenous Investments and Boughton Law as legal counsel.

Key Takeaways:

• The rate hike creates challenges for developers in the short term, but is necessary for the health of the overall economy, says BakerWest CEO Jacky Chan.
• Chan believes the challenges could impact housing numbers years down the line.
• He advised developers to act wisely and efficiently with the projects they choose.

The Whole Story:

In September the Bank of Canada increased its target for the overnight rate to 3.25 per cent.

It was the fifth consecutive rate hike this year and the bank noted that it planned to continue its policy of quantitative tightening.

“The global and Canadian economies are evolving broadly in line with the Bank’s July projection,” stated bank officials. “The effects of COVID-19 outbreaks, ongoing supply disruptions, and the war in Ukraine continue to dampen growth and boost prices.”

Bank officials explained that global inflation remains high and measures of core inflation are moving up in most countries. In response, central banks around the world continue to tighten monetary policy.
“The Canadian economy continues to operate in excess demand and labour markets remain tight,” said officials.

Officials added that given the outlook for inflation, the bank anticipates the policy interest rate will need to rise further.

“Quantitative tightening is complementing increases in the policy rate,” stated bank officials. “As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target. The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the 2 per cent inflation target.”

Jacky Chan, founder and CEO of real estate firm BakerWest, explained that while the hike will make things more challenging for developers in the short term, it is necessary in the long term for the health of the economy.

“The immediate impact of a rate hike, specifically for developers and developments is that it poses a change to the financial model of every single development.”

“When projects are being contemplated or planned, or the valuations or appraisals of land are being done, obviously the financial costs are a big component of whether something could move forward or not,” said Chan. “You see headlines saying the Canadian market is going to see a big crash, real estate will drop more than 25 per cent this year. To be honest I think those comments are far fetched. I don’t know where those speculations came from in terms of supporting factors. What a lot don’t realize the fundamental reason why the interest is being increased so dramatically. That is a forgotten truth. People only see the immediate negative financial effects.”

Chan explained that when times are tough the government wants to lower the rate to encourage more borrowing, hiring, purchasing and development, and more activity in general so it can sustain a downturn. He added that the government doesn’t make these decisions blindly.

“The government also knows all of the economic metrics ahead of time,” said Chan. “They have the most accurate forecast of real time economic data and also future economic data.”

According to Chan, such a drastic rate change suggests that the bank has evidence that the economy will get out of control if nothing is done. While this is good in the long term, it presents some short term challenges.

“A lot of the numbers have to be redone now,” said Chan. “It impacts the immediate borrowing capacity of developers and buyers. Furthermore it impacts developers in a much bigger way because most of real estate development is a business of financial leverage. You’re using heavy financial leverage to actually make a profit for developments. That basically takes away the majority or all the profit or the safety buffer for these major financial decisions.”

This can create a domino effect that ends up in less housing supply, something sorely needed throughout Canada. Chan said that when developers can’t build projects quickly, it will negatively impact housing supply, even at pre-construction and presale stages.

“Let’s say we have a lot of these developments getting slowed down or reworked,” said Chan. “It will effect a huge portion of the supply three, four, five, six years down the road. What will that mean for the demand that is also increasing?”

On the consumer side, those with mortgages could see a higher percentage of their payments going towards interest.

“With desperate times come desperate measures and each measure comes with a cost,” said Chan. “While it creates a positive impact for the long-term health of the economy, we need to learn to adapt during these difficult times.”

Chan said developers must be more discerning and that the rate hikes could weed out developers who act more impulsively.

“We need to be more effective, more careful and more efficient with everything we do,” said Chan. “It creates a situation where it will be a more healthily competitive market where everyone needs to be better, faster, more accurate and more careful with their work and calculations in order to succeed.”

Key Takeaways:

• The past 10 years have seen real estate listings in major Canadian markets decline.
• RE/MAX experts say a massive effort must be undertake during the current housing lull to avoid more boom and bust price cycles.
• Purpose-built rentals, new-home construction and policies that support and accelerate residential building activity are key to reverse the crunch.

Digging In:

Canada’s needs to take advantage of its real estate lull to build for future booms, a new report warns.

A recent report by real estate company RE/MAX Canada showed that inventory levels in the nation’s major real estate markets have been slipping over the past decade, with active listings in July running below the 10-year average in almost all markets surveyed based on Canadian Real Estate Association data and insights from the RE/MAX network. The company noted that this was despite softer overall real estate activity.

Declining inventory

The report pored over active listings in July from 2013 to 2022 in eight large markets—Greater Vancouver, Calgary, Winnipeg, Hamilton-Burlington, the Greater Toronto Area, Ottawa, Montreal (CMA) and Halifax-Dartmouth. 

Researchers found inventory levels have fallen below the 10-year average in seven of those markets in 2022. Double-digit declines are noted in Halifax-Dartmouth (65.5 per cent below the 10-year average); Ottawa (down by almost 42 per cent); Montreal (down 40 per cent from the nine-year average); Calgary (running 26 per cent below average inventory levels); Winnipeg (down 23 per cent), and Greater Vancouver (down 16 per cent). The housing inventory shortage was less-pronounced in the Greater Toronto Area, where supply was down almost seven per cent from the 10-year average. Hamilton-Burlington was the only market to buck the trend, reporting a nominal 3.2-per-cent increase over the 10-year average.

In analyzing the 10-year July average in the decade spanning 2003 and 2012, several Canada real estate markets experienced more active listings than in the most recent decade (2013-2022). These included the Greater Toronto Area (21,243 active listings versus 16,458), Hamilton-Burlington (3,473 active listings versus 2,304) and Greater Vancouver (14,352 active listings versus 12,792).

“Supply was far more robust in the early 2000s in centres such as Greater Vancouver, the Greater Toronto Area and Hamilton-Burlington,” explained Christopher Alexander, RE/MAX Canada president. “That stability lent itself to healthy sales and price appreciation year-over-year and provided an anchor for the Canadian housing market during the Great Recession. Population growth and household formation have played a significant role in depleting inventory levels from coast to coast over the most recent decade, triggering chronic housing shortages in large urban centres that resulted in mini ‘boom’ and ‘bust’ cycles. If we don’t move now to build more housing in the current lull, it’s expected that this same scenario will continue to resurface over and over again.”

According to Statistics Canada, Canada has seen significant double-digit population growth between 2006 and 2021, and that is poised to increase further with Canada’s commitment to bring in 1.2 million immigrants into the country between 2021 and 2023, combined with growth in new international students. The strategy is aimed at propelling economic growth and reducing labour shortages. 

Planning For Tomorrow

However, the report’s researchers explained that in the context of Canada real estate inventory, the increase in newcomers combined with new household formation overall is expected to intensify the inventory shortfall further, especially in the major urban markets of Vancouver and Toronto.

They believe that inventory remains key to the overall health of the Canada real estate market. RE/MAX noted a recent report from Canada Mortgage and Housing Corp. (CMHC) concluded that the country needs to build 3.5 million new homes by 2030 to address housing affordability, yet it is only averaging only 200,000 to 300,000 new units per year.

“The truth of the matter is that we probably need more than the CMHC estimate to create the desired level of affordability,” says Alexander. “During this window of softer demand, building efforts should be ramped up, not down. The offshoot effect is straining rental markets and contributing to ever-rising levels of homelessness throughout the country.”

Experts noted that it’s not just about more people. New housing starts and purpose-built rentals are few and far between. RE/MAX argued that the potential housing supply issue could push even more buyers into the rental pool, which itself is already facing pressure, as evidenced by rising prices. They believe this could result in even fewer listings of homes for sale, as some of the rental stock that comes on stream actually pulls from the stock of existing dwellings already in short supply.  

A Perfect Storm Gathers

According to RE/MAX, a number of factors have combined to create a perfect storm impacting available housing today and in the future, including inflation and rising interest rates, increased global supply chain interruptions, swelling construction costs and a serious shortage of trades labour, to high land acquisition costs and slow municipal approval processes.

“Current market realities have upended the economic viability of many developments, causing new residential projects to be cancelled or put on hold indefinitely,” said Elton Ash, executive vice president of RE/MAX Canada. “The feasibility of many new or planned housing starts is now in question, but the ones that already had smaller margins—affordable housing and starter homes—are at the top of the chopping block. If we’re already experiencing an inventory crisis, what will the consequences be when demand rebounds?”

Projects Shelved

Researchers stated that developer pullback is evident in light of softening demand in the short term combined with current economic and market realities. CMHC noted a decrease in the seasonally adjusted annual rate of housing starts in Canada’s urban areas in July of 2022, driven by lower starts in the single-detached category. 

CMHC found stronger declines in multi-unit residential starts in Vancouver, while a significant slow-down occurred in both multi-unit and detached residential starts in Montreal. Yet, RE/MAX stated that the trend could be strangest in Canada’s largest housing market—Greater Toronto. According to the Q2-2022 Condominium Market Survey by real estate research firm Urbanation, approximately 35,000 new condo units were anticipated to launch for pre-construction sale in the GTA in 2022. In the first half of the year, close to 16,000 units were launched. With less than 10,000 units expected during the remainder of 2022, it’s estimated that at least 10,000 new units will be put on the shelf.

“The phenomenon of scrapped or paused development projects is a serious concern, and various stakeholders are taking stock and assessing future impacts,” says Alexander. “The challenge is that we need a new development and growth strategy that is geared toward the long-term outlook. There simply isn’t enough stock to keep pace with demand now, and the need for housing is intensifying with population growth. Although demand is currently softer that we’ve seen in the last two years, it is expected to rebound, and our market is not prepared for when that happens. We’re seeing fewer housing starts at a time when we should be getting ready for the next inevitable upswing.”

Researchers argued that purpose-built rentals, new-home construction and policies that support and accelerate residential building activity – including factors like zoning, development fees and levies, approval processes, government partnerships, interest-free loans and incentives – are key to reversing the inventory crunch. 

“The trouble is that housing development is a slow process, and experience tells us the only thing slower might be government processes,” said Alexander. “Removing barriers and cutting red tape is necessary. A crisis is looming, but the outcome is not cast in stone. There is a short runway to reverse course before the impacts become very real for Canadian homebuyers and renters.”

Key Takeaways:

• Calgary is helping fund research into creative downtown revitalization.
• Research will be conducted by experts at the University of Calgary.
• One of the next steps will be bringing in stakeholders like building owners, developers, policy makers and civic leaders to realize new projects. 

The Whole Story:

The city of Calgary is looking for more ways to breathe new life into its downtown core. 

The city will spend $350,000 on research as part of its partnership with the School of Architecture, Planning and Landscape’s (SAPL) Civic Commons Catalyst Initiative at the University of Calgary. The funding will allow Civic Commons Catalyst researchers search innovative methods to spur economic revitalization in the downtown and transform underutilized spaces. The project is part of the Urban Alliance, a strategic partnership between the city and the University of Calgary.  

“The transformation of downtown Calgary will yield benefits citywide for generations to come,” said Terry Wong, city councillor. “We’re making an investment in the Civic Commons Catalyst because the University of Calgary brings both local and global expertise, along with a focus on innovation and the use of data and research to help address urgent issues Calgarians face daily.”

With the funding, the city and SAPL’s Center for Civilization will proceed to new phase of the Civic Commons Catalyst partnership with a focus on transforming underutilized public and private space. The city noted that it has placed a priority on this area of work through its office to residential conversion program, projects that are exploring how public space is utilized on Stephen Avenue and 8 Street S.W., and working with community organizations to activate and program public space.

“While it is the whole of civilization that finds itself at a critical inflection point, it is cities where these challenges will unfold. Therefore, cities must be the fulcrum upon which bold solutions are found,” said Alberto de Salvatierra, director of the Center for Civilization and assistant professor at SAPL.

As SAPL comes up with ideas, they will make recommendations to the city’s downtown strategy team. City officials said that bringing in stakeholders like building owners, developers, policy makers and civic leaders is the next step, and facilitates the potential of realizing these projects. 

“This research partnership exemplifies the University of Calgary’s commitment to our community and the critical importance that design-based research plays in the shaping of great cities and societies. Downtown Calgary is facing unprecedented challenges from high vacancy rates and social vulnerability that is affecting the quality of life in our city,” says Ed McCauley, University of Calgary president and vice-chancellor. “The Civic Commons Catalyst reframes these problems to show how underutilized spatial assets can become opportunities for social, economic, and environmental innovation. It is an important example of how great universities and great cities can work together.”

The federal government plans to spend more than $2 billion to create 17,000 homes for families across the country, including thousands of affordable housing units.

The investment, which includes funding from budget 2021 and budget 2022, will go toward:

• Creating 4,500 additional affordable housing units by extending the Rapid Housing Initiative for a third round. This will include women-focused housing projects and projects supporting those experiencing or at risk of homelessness;
• Creating at least 10,800 housing units, including 6,000 affordable units, through the Affordable Housing Innovation Fund, which encourages new funding models and innovative building techniques in the affordable housing sector; and
• Creating a new, five-year rent-to-own stream under the Affordable Housing Innovation Fund to help housing providers develop and test rent-to-own models and projects, with the goal to help Canadian families across the country transition from renting to owning a home.

Applications are now being accepted for both the Affordable Housing Innovation Fund and its new rent-to-own stream. As part of their application, candidates will be required to demonstrate their commitment to innovation, affordability, and financial sustainability.

More information on the extended Rapid Housing Initiative will be available soon, followed by the opening of the application and proposal process.

“When people have a home of their own, whether they rent or they own, they are better able to invest in themselves, and invest in their communities,” said Prime Minister Justin Trudeau. “Our government understands that it is only by investing in people, that we can grow our economy. Tackling housing affordability is a complex problem and there is no one silver bullet, but announcements like today’s give more people a place to call home, and a real and fair chance at success.”