OCS Survey: Busy year projected for Ontario Construction, but less optimism than 2023

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By Mark Buckshon

Ontario Construction News staff writer

With an abundance of current work and more projects on the horizon, Ontario contractors in most of the province (especially in Northern Ontario) are expecting 2024 to be a busy year, the Ontario Construction Secretariat’s (OCS) annual Contractor Survey has found.

While there remains concern about rising costs for materials and labour, there has been a noted improvement in the supply chain and growing interest in innovation and technology to increase productivity and lower costs.

However, the percentage of contractors province-wide with a “positive outlook” has declined to 66 per cent from 81 per cent in 2023, and notably in Eastern Ontario, 27 per cent of contractors expect less business this year compared to 2023, compared to 27 per cent seeing an increase.

Provincially, the positive perception is strongest among unionized contractors, with 71 per cent expecting more business. The less robust numbers for the non-union sector can be explained in part by relative weakness in the residential market, OCS economist Katherine Jacobs said last Thursday (March 7) at the annual OCS State of the Industry and Outlook Conference in Mississauga.

“There is a massive project pipeline in Ontario that is fuelling positivity about business prospects,” OCS chief executive officer Robert Bronk said in a statement.

“Power generation, transit and health-care facilities are leading the list of projects currently under construction or slated for construction over the next few years in every region of the province,” Bronk said.

The positive outlook in Northern Ontario is fuelled largely because of increased demand for mining and institutional projects.

Building trade unions and their contractor partners continue to be leaders in apprenticeship training, with 78 per cent of union contractors reporting having apprentices as part of their team, compared to only half of non-union contractors.

There is also a strong support for the adoption of new technologies; 83 per cent of those surveyed feel adopting new tech is important to the future of their business, and 15 per cent have created a budget to invest in new technology. The most commonly used technologies were BIM (44 per cent) and jobsite data collection apps (43 per cent).

The survey showed that “widespread adoption of robotics, including drones and wearables, has not yet been achieved in the construction industry”.

“While drone usage has doubled since 2018, wearables have actually seen a decrease in adoption,” the survey reported.  “One theory about the slow adoption of robotics is that companies are primarily investing in lower-cost technology, like drones. Drones are versatile and can be used for a variety of jobsite tasks, including monitoring, surveying, inventory and data collection, and can drastically reduce the time it takes for these activities.”

Accordingly, 19 per cent of surveyed contractors expect to use drones in 2024, compared to 10 per cent in 2018; while wearables are declining to 20 per cent from 28 per cent in 2028.

Ongoing labour challenges remain a concern, with 65 per cent reporting that they expect recruiting skilled workers to be more difficult in 2024 and nearly half (48 per cent) citing the availability of experienced skilled labour as the top concern in 2024.

But that isn’t tempering expectations for job creation in the sector, with 34 per cent of respondents expecting their workforce to be larger this year, against only eight per cent who expect the number of people they employ to drop.

If there is one projected drag on the outlook for 2024, it is rising costs. One in five open-ended responses to the survey cited increasing prices, whether it was for labour, materials, or higher interest rates. Following availability of labour, material costs (28 per cent), labour costs (27 per cent) and transportation costs (25 per cent) were listed as the top concerns of the year.

“Despite a mostly positive outlook for ICI construction in 2024, the rising costs we are all facing remain a concern,” Bronk said. “But it is encouraging that despite this worry, there are still strong expectations for growth and expansion over the coming year, with many contractors implementing new technologies to help create efficiencies and support business success.”

The OCS Contractor Survey polls the province’s institutional, commercial and industrial construction sector to gauge business expectations and present views on salient issues impacting the industry. The survey was conducted via phone interview with 500 contractors between November 2023 and January 2024, including union and non-union companies.

Also at the OCS conference, Robert Kavcic, senior economist and director, BMO Capital Markets, described the economic outlook as being “resilient, but still at risk”.

The post-pandemic Canadian economy is benefiting from “excess labour demand”, a savings cushion, and rapid population growth.  However, high real estate/rental costs and debt, coupled with the higher interest rates and lags in monetary policy impact could put a damper on growth.  Productivity levels are challenging, and wage pressures are offsetting other improvements, so interest rates are not not going to decline rapidly, he said.

That said, while Ontario’s economy may be sluggish this year, with a real Gross Domestic Product (GDP) growth of just 1 per cent, Kavcic expects the province will lead the nation with real GDP growth of 2.3 per cent in 2025.

Housing supply and costs will continue to be challenging, he said. High housing costs have  resulted in a trend for Ontario residents to migrate elsewhere in Canada (especially the Maritimes and Atlantic Canada) where costs are not so extreme.  However, this internal migration is offset by the extremely rapid immigration growth, both of permanent and temporary residents, he said.

Infrastructure Ontario president and CEO Michael Lindsay outlined the rising volume of projects either in planning or under construction – reaching $42 billion where work is under-way.  This volume represents the highest level of public tendering in Canada, he said.

 

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