The Owl newsletter from Alberta Treasury Branches posed this provocative question. Based on StatsCan data, there has been a perception of recent overbuilding in both Edmonton and Calgary, particularly in commercial real estate. Given that does the future pullback due to supply and demand market forces mean a collapse in these construction markets?
Using building permit data from both cities, the conclusion is construction activity in 2017, Calgary will be close to the ten-year running average. Edmonton is projected to be 13% above its ten-year running average. ATB notes things are “slow compared to two years ago” but taking a 10-year view, that includes two recessions, and “plenty of booms” construction is now “average.”
This data hardly portends a collapse, but a return to normal market conditions, and away from the overheated markets of 2014-15. Calgary is feeling the decline as permits are 25% plus off the peak construction in a recently over-heated market. That has resulted in high office space vacancies caused by the downward pressure on oil prices induced by the Saudis attack on US shale production. Boom and bust mentality is alive and unwell in Calgary.
Edmonton, on the other hand, did have a significant construction growth sparked by the removal of height restrictions from the closing of the municipal airport and the ripples from the downtown arena project. The current situation is Edmonton building permits are still above the ten-year average.
So the lessons to be learned in these “average time” is to not get suckered into the boom and bust cycles of the past. This is the time for Alberta construction businesses to look at investing in improving their processes, productivity, workforce capacity, and to look at adopting new technologies. Progressive businesses will be revising and getting ready for responsible, sustainable and resilient long-term rational growth.
Progressive businesses will be taking steps and getting ready for responsible, sustainable and resilient long-term rational growth. GO Productivity is able to help construction SMEs and their suppliers in getting leaner, greener, cleaner, smarter and quicker and able to take advantage of better ROI in these new normal times. They are looking forward to hearing from you.