Revenue will outpace costs until 2008: Conference Board
After more than three years of growth, profits in Canada's non-residential construction industry are expected to peak at $2 billion in 2007, according to a new report from the Conference Board.
"Construction of office buildings, especially in Alberta and Ontario, is the main reason for the record financial performance in recent years," said Valerie Poulin, economist at the Conference Board.
"However, rising material and labour costs are starting to trim builders' profit margins. Since labour accounts for a third of all costs, the tight labour market is of particular concern for the industry."
The Conference Board's Canadian Industrial Outlook: Canada's Non-Residential Construction Industry - Summer 2007 found solid economic growth is pushing office vacancy rates down and spurring construction activity, leading to record price increases in 2006 and 2007.
Revenues and costs rose by more than 20 per cent in 2006, and are forecast to increase by more than 10 per cent this year. In 2007, revenues will again rise faster than costs, as they have for the past two years.
Growth in demand for new construction is forecast to ease slightly in the next two years. Meanwhile, labour and material costs will increase faster than revenues beginning in 2008.
Profit levels are expected to fall every year through 2011, but they will still be considered high by historical standards.
"Construction of office buildings, especially in Alberta and Ontario, is the main reason for the record financial performance in recent years," said Valerie Poulin, economist at the Conference Board.
"However, rising material and labour costs are starting to trim builders' profit margins. Since labour accounts for a third of all costs, the tight labour market is of particular concern for the industry."
The Conference Board's Canadian Industrial Outlook: Canada's Non-Residential Construction Industry - Summer 2007 found solid economic growth is pushing office vacancy rates down and spurring construction activity, leading to record price increases in 2006 and 2007.
Revenues and costs rose by more than 20 per cent in 2006, and are forecast to increase by more than 10 per cent this year. In 2007, revenues will again rise faster than costs, as they have for the past two years.
Growth in demand for new construction is forecast to ease slightly in the next two years. Meanwhile, labour and material costs will increase faster than revenues beginning in 2008.
Profit levels are expected to fall every year through 2011, but they will still be considered high by historical standards.
