High interest rates and excess inflation have reignited a slump in investment in industrial, commercial and institutional real estate projects, says a new report from the B.C. Construction Association.
In the first half of 2023, real investment in ICI projects was essentially flat, dipping 1.6%, but it remained 14% below its 2019 peak. Momentum has dissipated after real investment rebounded more than 10% in 2022 as the COVID-19 pandemic eased, the economy reopened and pent-up demand was released into the marketplace.
The situation is different in actual terms, said the BCCA. Developers’ expenditures on building construction have increased 10% from pre-pandemic levels in February 2020 due to higher construction-delivery costs. Increases have resulted from worker shortages, lengthy lead times for equipment and other construction inputs and challenges in obtaining timely payments from service purchasers.
In nominal, not inflation-adjusted terms, institutional and government construction has increased more than 45% since February 2020. But industrial construction is down 12% in real terms and 4% in nominal terms over the past year.
In nominal terms, industrial construction has declined 9% since the start of the pandemic.
Monte Stewart serves as Content Director - Canada for Connect Commercial Real Estate.
Based in Vancouver, British Columbia, Monte provides daily news coverage of major Canadian commercial real estate markets, including Vancouver, Toronto, Montreal and Calgary. He has written about the real estate sector for various media outlets and Avison Young since the early 2000s.
In addition, he has covered sports, general news and business for several leading wire services and publications, including The Canadian Press, The Associated Press, The Calgary Herald, The Globe and Mail, Research Money, The Daily Oil Bulletin, Natural Gas World and The Toronto Star.
Monte is active in his community as a youth basketball coach and raises funds for such charitable causes as Movember.