The record-setting pace of Canadian construction may be hitting the brakes after the value of building permits dropped more than 22 per cent in February compared to the month before, according to new numbers from Statistics Canada.

Municipalities issued $4.9 billion worth of building permits during February, down 22.4 per cent over January. It represented the fastest drop in the last 13 months for residential and non-residential construction, the government agency reported.

Most people in the industry are anxiously waiting to see if the March numbers show a continued trend.

But January also had an unusually high dollar value of permits – $6.2 billion – the second highest on record. The numbers were only down 12 per cent when compared with last year’s monthly average.

Illustration courtesy
Rendering for the One Bloor East building in Toronto by Bazis International.

In its survey of 2,380 municipalities, Statistics Canada researchers reported residential and commercial construction “intentions” fell in all provinces except Manitoba.

Six provinces – Prince Edward Island, Nova Scotia, Quebec, Ontario, Alberta
and British Columbia – all recorded double-digit decreases.

In the residential sector, permit values declined across the country 17.8 per cent to $3 billion, the lowest level since March 2005.

The biggest decline in residential permit value was noted in Ontario, with its lowest level since December 2001 at $1 billion. Toronto came in with a 25-per-cent fall to $926 million, which Statistics Canada attributed to a drop in single-and multi-family dwellings.

But Anne Borooah, executive director and chief building official for the City of Toronto, says the pace certainly didn’t slow down in her office.

“We tend to look at the larger picture of one year over the next,” Borooah said. “February was actually fairly strong compared to previous years and March was an excellent month. I think this is going to be a strong year overall for the city in terms of building permits.”

The monthly survey looked at building-permit values in 34 metropolitan areas across the country, representing 70 per cent of the total value of permits for February.

About 20 of those areas reported their building permit values declined in February compared to the month before. The largest dollar value losses were in Regina (56.3 per cent), Vancouver (34.4 per cent) and Toronto (25 per cent).

Meanwhile, despite being known for cold winters, Winnipeg was a red-hot market in February.

The Manitoba capital approved $92.7 million worth of building permits in February, compared with $66 million in January for more than a 40-per-cent increase. But that didn’t extend to Saskatoon, which went from $46.3 million in January to $37.3 million for February, amounting to a 19.3-per-cent drop.

In boomtown Calgary, the Statistics Canada report showed $342 million worth of building permits were issued in February compared with $435.2 million during January for a 21.4-per-cent decrease. Edmonton was similar, with $348.7 million in January and $281.7 million in February, which was 19.2 per cent less.

Building permits are required by municipalities for most construction ranging from erecting an entire condominium building to a homeowner adding a backyard deck or sunroom.

One of the biggest projects that already passed municipal approval in Toronto this year is an 80-storey condo/tower at the intersection of Yonge and Bloor. Kazakhstan-based developer Bazis International recently held a press conference to announce demolition of the site will begin later this year.
One Bloor East is scheduled for completion in 2011.

Toronto has seen its share of developers who have announced big projects, then dropped plans long before construction starts.

For those who suspected the proposal might not be serious (actor Sasha Baron Cohen told unsuspecting victims of his pranks in last year’s movie Borat that he was from Kazakhstan), the developer said it had already lined up $450 million in financing for the project. Another $2 million would be spent on improvements to the surrounding Yorkville shopping district, which boasts high-end retailers including Holt Renfrew, Gucci and Prada.

Bazis International also has street credibility. Excavation has already begun on its nearby Crystal Blu project.

At 80 storeys, the One Bloor East project still won’t be the tallest on the Toronto skyline. Residential storeys are generally about half a metre shorter than in commercial buildings. In comparison, the Scotia Plaza building comes in at 68 storeys and 275 metres, while First Canadian Place is 72 storeys and 298 metres. Toronto also has its distinctive CN Tower building at 553 metres.

The lower trend of building permits continued with commercial projects. February’s sharp decrease in “non-residential intentions” came after very strong months in the last part of 2006 and in January of this year, Statistics Canada reported.

Commercial permit value dropped 20.2 per cent to $1.1 billion, the lowest level since February 2006 and the third decline over the past four months.
Eight provinces showed decreases, with the largest drop in Alberta, Quebec and Ontario. The $187-million value of commercial permits in Alberta was the lowest since September 2005.

B.C. and Manitoba reported monthly gains in commercial permits, boosted largely by new trade and services buildings that started construction in both provinces, according to Statistics Canada.

The agency’s researchers added the non-residential market has a good prognosis. Strong corporate profits, declining office vacancy rates, and increased business and government spending all point to continued growth or at least stable activity in the months ahead.

(David Hatton can be reached at hatton@businessedge.ca)