The State of Construction Costs in Canada: A Perfect Storm of Challenges

Construction costs in Canada are currently experiencing a significant upsurge, driven by a combination of inflationary pressures, fluctuating tariffs, and a complex labour landscape. As industry members express concerns about these escalating costs, the implications for construction firms and the broader economy become increasingly pronounced.

Labour and Development Charges: The Key Contributors

Labour and development charges are often cited as primary factors behind rising construction expenses. The B.C. Construction Association (BCCA) indicates that despite a slowdown in the construction market, inflation remains a pressing issue. In its fall statistic package, the BCCA reported a year-over-year increase of 4% in construction material costs, doubling the Bank of Canada’s inflation target. Additionally, labour costs have skyrocketed by 16% compared to last year, bringing the average construction wage to $83,667—a staggering 41% increase over five years.

However, even as job vacancies within the industry have dropped by 37%, there remains a significant shortfall, with 7,310 construction jobs still unfilled.

The Impact of Tariffs on Material Costs

The construction industry is also grappling with tariffs, notably a 25% levy on steel and aluminum imports from the U.S. While Canada has lifted some tariffs, these additional costs severely inhibit profitable importing. Rod Stephens, president of All-Roads Group, voiced frustrations over the $75,000 tariff on a $400,000 steel holding tank needed for plant upgrades— a cost he has been unable to reclaim.

Anoop Khosla, managing director of Midvalley Rebar, echoed this sentiment, noting that the high tariffs effectively wipe out the financial viability of importing essential materials like rebar. The Alberta steel plant, Canada’s lone facility producing rebar, operates at only a third of the market demand, forecasting a potential shortage by spring.

The Resilient Roofing Sector

Despite the mounting challenges in construction costs, sectors like roofing continue to adapt. Bryan Wallner, CEO of the Roofing Contractors Association of BC, highlights that the roofing market can source materials from a wider range of international venues, enabling the avoidance of some tariff-related costs. This adaptability extends to training: a spike in interest for roofing and architectural sheet apprenticeships indicates potential growth in workforce capacity to tackle ongoing projects.

A Broader Perspective on Industry Pricing

The inflationary pressures are pervasive across various materials and services, according to Neil Thomas from Northern Building Supplies. While the BCCA’s 4% figure may underestimate the reality, Thomas underscores that every order necessitates revisiting pricing to align with current costs. He notes that equipment prices have more than tripled since 2006, revealing the broader implications of compound inflation over time.

Conversely, some commodities, such as plywood, have seen price corrections from exorbitant COVID-era increases. Mark Sutherland from Richmond Plywood reported a drop of over 50% in plywood costs, thanks to soft market dynamics and competition. Even so, he cautions that rising resin and shipping costs, alongside labour prices, continue to squeeze margins.

Concerning Development Costs in Major Urban Areas

Cities like Toronto are grappling with staggering growth in development costs. The price for developing a one-bedroom apartment has jumped from $5,000 in 2019 to $52,000 today—a reflection of increasing regulatory and construction expenses. As municipalities reevaluate these costs, projections indicate that added expenses for water, sewer, and community amenities could escalate total development costs significantly by 2027.

The Trucking Sector’s Evolving Landscape

Interestingly, while the construction sector faces multiple hurdles, the trucking industry appears to be thriving. Bill Coutts of Inland Trucks mentions an uptick in business as demand for trucks rises. The post-COVID scramble for equipment has shifted buyers toward used markets, although ongoing upgrades will increasingly involve navigating new emissions standards set for 2027.

Dave Earle of the BC Trucking Association acknowledges a likely oversupply of trucks and drivers, which may help mitigate inflation in the trucking sector but adds layers of complexity regarding future equipment purchases amid evolving standards and regulations.

Conclusion: Navigating a Challenging Future

The future of construction costs in Canada is steeped in uncertainty, influenced by multifaceted factors ranging from labour shortages to tariff complexities. As companies strive to adapt in real-time and contend with rising costs, the ability to navigate these challenges will likely dictate the industry’s health in the coming years. Ultimately, collaboration between industry stakeholders, government, and educational institutions may be vital in fostering a more resilient construction landscape in Canada.