Alberta has been operating on a virtual economic island in the middle of a stormy North American financial downturn.
Let the seas of job cuts and stock declines rage. Here, Edmonton leads the way with talk of the lack of skilled labour and the inability of supply to meet demand.
The city’s construction industry, which reflects the economic climate of the previous year or two, has been setting all kinds of records.
Half of the houses on the market sell within the first 30 days of being listed, with an increased selling price of about four per cent over last year.
Residential rental costs have skyrocketed and the vacancy rate is next to zero. CMHC says 15 per cent more houses were built in the first eight months of this year than the same period in 2000, with the biggest increase (about 30 per cent) coming in the last few months.
Business-friendly policies continue to bring people into the province and sustained low interest rates encourage them to buy homes.
Office vacancy rates increased in almost every city in Canada over the last year. But in Edmonton the vacancy rate has dropped from 12.5 to 10 per cent, Royal LePage reported. Downtown recorded a positive absorption of 124,672 sq. ft. in the last quarter alone.
This year, an average of 20,000 more people are working in metro Edmonton than during the first eight months of 2000.
Major local commercial and industrial construction companies such as Stuart Olson Construction and the Churchill Corporation have millions of dollars in work lined up for the years ahead.
Yet terrorism and threats of war, fluctuating oil costs and the Klein government’s recent $1 billion cut in infrastructure spending make predicting the future of the construction industry a dicey task.
Times Square is closer to Winston Churchill Square than the Middle East, but it’s not on Edmonton’s doorstep either. The city’s geographic isolation seems to be buoying consumer confidence.
Oil prices have dropped from their cushy high, but nothing even close to early 1999’s $11 per barrel. Is it a big enough drop to affect the construction industry? Maybe, but in the near future there is little likelihood current industrial projects in progress will be cut short.
The only major upheaval is the provincial government’s decision to take more time for its construction projects.
Significant upgrades to the Royal Alexander and University Hospitals will be postponed. Various school projects, including a $63-million expansion to the Victoria School of Performing and Visual Arts, are also being put on hold.
“It’s getting to be a bit of a hazardous exercise to forecast much farther out than six months,” says CMHC’s senior Edmonton analyst Richard Goatcher. “With the lack of any data telling us the wheels are coming off the wagon, we’re going with the assumption that we’ve got a pretty sound economy in Alberta . . . The market has a huge amount of momentum.”
In spite of the local upbeat market, a recent Canadian Construction Association (CCA) five-year projection doesn’t see sustained growth in Alberta over the next few years. The report states the province will see a decline in the construction labour force from 141,800 in 2001 to 133,900 in 2005, at which point the industry is predicted to pick up again.
In the light of long-term lows and highs, the projection is more of a cooling or plateauing than a plummeting.
Jeff Morrison of CCA says Informetrica, the company preparing the numbers, took into account the completion of major Albertan tar and oilsands projects in the next few years, the decline in oil prices (which it expects to last for until 2005) and the province’s recent growth rate.
“It’s more a matter of being a victim of your own success,” says Morrison.
The projection came as a big surprise to many in the construction industry in Edmonton.
“I had not had any indications of that or heard any stories or anything like that from anybody,” says Ron Copithorne, president of the Greater Edmonton Home Builders’ Association (GEHBA).
“It’s the first time that I’ve ever heard anybody even suggest (a downturn in the industry in 2002).”
This summer’s residential construction growth dramatically exceeded the GEHBA’s bold predictions in January and Copithorne sees the trend continuing. His main concern remains getting new blood into the construction industry to meet the new housing demand.
“I just hope (the CCA projections) won’t have a negative effect and prevent potential young people considering a career in the construction industry from starting out,” says Copithorne.
CMHC’s Goatcher feels cautious optimism is the attitude to deploy. “The last thing we want to do is go out and join the Chicken Littles and say the sky is falling in.”