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Construction Keynote panel explores the state of the industry

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by Kathleen Renne

Will the Alberta construction industry sink or swim? That's the crystal-ball question construction executives will attempt to answer as they offer up the Construction Keynote address titled State of the Industry: Boom or Bust? at Buildex Calgary on Wednesday, Nov. 4.
Construction Keynote panel explores the state of the industry

One of the participants is Tim Coldwell, Chandos vice president. Despite the doom and gloom overhanging current conversations pertaining to the Alberta economy, Coldwell maintained that the long-term economic prospects for Alberta are exceptionally strong.

"Yes, energy prices are low now, but we know the world needs energy," he said.

"Alberta is still a great place to be."

When it comes to how current oil prices are impacting the construction industry specifically, Coldwell said Chandos has tracked the correlation between energy prices and building permits for a number of years.

The research has shown there is a tight correlation between the two, he said.

During the recession of 2008-09, for example, Coldwell said building permit volume dropped by 25 per cent. And, he said, indications are building permits will decrease once again with this current economic downturn.

He added that an analysis of single-family home starts is a leading indicator of the impact the current economic climate will have on the construction industry as a whole.

"Single-family home builders in Calgary are hurting," Coldwell said, although he noted that residential construction is not the prime focus of companies participating in the Buildex construction keynote.

Statistics show urban housing starts decreased in Alberta from 3,613 in September 2014 to 2,934 in September 2015, a year-over-year decline of 18.8 per cent. In September, single detached starts decreased 32.8 per cent in Alberta.

The Canada Mortgage and Housing Corporation's (CMHC's) quarterly 2015 Housing Market Outlook report (Canada Edition) released in late October notes that housing starts in Alberta will decrease next year by almost 20 per cent from 2015 levels.

Coldwell said one of the reasons Alberta's construction industry will suffer from the current economic downturn is simply because migration to Alberta will slow as the provincial job market softens. Consequently, there is less need for new construction to accommodate newcomers to the province.

While Coldwell said there is tons of work on the market currently, the real concern lies with how much work there'll be next year and the years following.

Others agree.

"We are concerned as we work off our backlog and as that backlog starts to diminish in a year or two out," said  Frederick Vine, EllisDon's director of business development.

Construction keynote participant Bob Hildenbrandt, vice president of building development for Graham Construction, said Graham's industrial division, which does some work in the oil and gas sector, has already felt the effects of the current downturn. However, Hildenbrandt said, construction activity in the commercial world remains steady.

He added that there is often a lag between when the economic alarm bells ring and the construction industry feels the impact.

"We're waiting to see what 2016-2017 will bring," he said, adding the outlook is not as robust as it has been over the past few years.

The year started off well for some.

"Earlier this year, I would have said we are white hot. We hadn't seen any change in construction pricing and we were ridiculously busy," Coldwell said.

Now, however, he said the industry is starting to see a change in contractor pricing.

"We're seeing a significant tightening of trade-contractor pricing in the industry, but there's upwards pressure on materials because a lot of them come from the U.S.," he said. Current exchange rates are impacting supply costs.

Coldwell said many in the construction industry are awaiting what Alberta's New Democratic government –and the newly elected federal government - will do when it comes to infrastructure spending.

"When the private sector is down, the best way for a government to invest in our economy is through infrastructure spending," he said.

Another panelist agreed about the need for infrastructure spending.

"The federal government made all kinds of promises on infrastructure spending. We'll see if they hold to those promises. Dollars on infrastructure spending is the best-case scenario," said Vine. Graham added that those attending the construction keynote can also expect discussion about issues other than the economy including impending changes to workforce demographics and new technologies that will come forward over the next five years.

"My personal sense is that we've been through this before, and it wasn't the end of the world. It's good for industry to go through cycles like this. It gets rid of sloppy operators and lets the cream rise to the top," said Coldwell.

"There are a lot of people running around, wringing their hands ... Instead, industry leaders should reframe this as an opportunity for employees and companies."

The Construction Keynote – State of the Industry: Boom or Bust? – takes place from 10 a.m. to 11:30 a.m. on Nov. 4.

Other panelists include Michael Brimer, director of business development for Clark Builders and Bert DeBruin, the president of Alta Pro Electrical Ltd.

Bill Black of Mindnetworkx will moderate the panel discussion.

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