COVID-19 Disrupts The Canadian Construction Industry

COVID 19 Disrupts Canadian Construction

As we are now six weeks into a world-wide pandemic, we are looking at the Canadian construction industry to see how they are coping and what we can expect in terms of progress and costs. As an essential service, many sites forge on, but the decline in the availability of workers, accessibility to key construction materials, and delays associated with adapting site safety measures, are all leading to major disruptions across the industry.

About Canadian Construction

The construction sector is one of Canada’s largest employers and a significant contributor to the country’s economy. The industry employs more than 1.5 million Canadians and contributes to 7 per cent of Canada’s Gross Domestic Product (GDP). In March, the Canadian Construction Association (CCA) released it’s standardized protocols for all Canadian construction sites – a living document that is updated with the guidance of public health authorities. It highlights best practices and a consistent national approach to protect the well being of all those in the industry.

An Essential Service

Many job sites across the country have remained open and are subject to the recommendations set out by provincial governments across Canada. Mary Van Buren, President of the CCA is quoted in a March press release,

“The projects we deliver are fundamental to Canadians’ quality of life and to the success of our country. In many cases, they support the delivery of essential services, including the clean water we drink, energy infrastructure and the power grid, critical transportation infrastructure, and the hospitals and other health care facilities where we receive care.”
Public Safety Canada supports Van Buren’s claims and explicitly states which sectors of construction are essential on their website here. Yet, many provinces included commercial, residential, industrial, and institutional sectors in their lists of essential workers, including BC, Alberta, and Ontario.

Impacts on Construction Sites

Several provinces across Canada have declared a state of emergency, including Ontario, British Columbia, Alberta, Manitoba, and Nova Scotia. The provinces of Ontario and Québec have additionally issued all non-essential workplaces to be suspended until further notice. While in Québec, all residential construction has been shutdown between March 25 to April 20, some workers returned to residential construction sites to help the province avoid a housing crisis.  Exact figures are unknown as to how many private sector construction sites for residential and commercial use have remained open, but it is suspected that most have continued on despite disruptions and concerns from workers.

Reduced Productivity

The most obvious source of delay occurs from a full project shutdown, following a government order to suspend all work. Projects are experiencing low productivity due to understaffing and physical distancing. Physical distancing measures put forth by the federal government is restricting the number of people on-site and imposing an increased control of site movement. An example of this can be seen in developments where elevators and hoists are used; with only two workers at a time on a 40-storey tower trying to get to their floor[,] that’s an hour per person lost every day (minimum).

Worried Workers

The CCA claims that the construction industry already has “highly disciplined health and safety protocols” which are being “significantly amplified” based on recommendations put forth by public health officials. However, construction workers have voiced concerns about the inability to put the added protocols into practice. Jack Da Silva, an agent for Labourer’s International Union of North America (LiUNA) Local 183, was captured on video on an unidentified site in downtown Toronto stating,

“When you’re in the work site there, you guys don’t have six feet around you. We’re all breathing on each other. Where’s your eating facilities? Are they sanitized? Do you have water to wash your hands when you eat your sandwiches?”
A Labourers’ Union business agent’s video plea for safer site conditions in Toronto during the COVID-19 pandemic has been captured and broadcast.

After the recent outbreak at the Kearl Lake oil sands facility in Alberta, these concerns are legitimate and protocols need to be taken seriously and implemented to the fullest extent.

Supply Chains Affected

The disruption in supply chains is also putting a strain on construction projects due to restricted border access and limited manufacturers. While Canada has made efforts to keep supply chains open for trade and commerce, such as the Canada-US border, the decline in manufacturing from other countries is starting to have an impact.

In 2019, China was Canada’s second biggest source of imports, behind the U.S. (which supplies half of what Canada buys). However, much of the items that are imported to Canada from the US require materials which the US imports from China. At the peak of the Covid-19 pandemic, China had shut down factories which were responsible for producing 80% of it’s exports. The Port of Vancouver – a major hub for import goods has reported fewer container vessels due to reduced cargo-loading activities at Chinese ports. There will be a trickle down effect as we deplete our existing inventories, and despite China’s manufacturing beginning to pick up again, demand will continue to slow from it’s major trade partners in North America and Europe.

Dennis Darby of Canadian Manufacturers and Exporters (CME) said that manufacturers cannot shift their delivery models like other industries. “The production workforce can’t work from home. The local and international supply chains of production components will become restricted and their customers will limit purchases.”

Construction Costs

How construction costs will be impacted is still too early to be seen. It will depend entirely on how long the pandemic continues. The Altus Group has an interesting opinion piece on this that explains a short-term recovery from COVID-19 could see stabilized and perhaps even increased costs, whereas a long-term shutdown will see heavy declines. For a more detailed read, view the article here.

Final Thoughts

The construction industry and its costs are always fluctuating, similar to the fluid developments of COVID-19. The CCA is calling on the Government of Canada to issue a clear statement and work towards future legislation on how it will handle delays, project disruptions, and other costs incurred due to the outbreak. The construction industry plays a vital part in Canada’s overall economic health, so continuation of that sector is imperative for economic recovery. However, precautions must also be taken to ensure the safety of its workforce.

Normac is taking precautionary measures to protect our staff, clients, and to do our part in preventing the further spread of COVID-19. Read more about our efforts here.

Cover image from blogTO, 3 Workers Test Positive For COVID-19 At Toronto Construction Site: https://www.blogto.com/city/2020/03/3-workers-test-positive-covid-19-toronto-construction-site/

COVID-19, The Canadian Economy, And The Housing Market

As Canadians enter their 4th week of a national shut down and physical distancing, we are beginning to see some of the effects on the Canadian economy. There has been an obvious downturn as businesses have closed their doors and workers laid off. While there are a few companies reporting growth during the pandemic, such as Canadian owned Dialogue Technologies and Loblaws, most are seeing steep declines and predictions of a global recession are looming.  While it is still too early to know what will happen or how we will emerge from this, here is a round of what experts are saying about the Canadian economy and how it will affect the housing market.

Canadian Economy - What Is Happening?

Economists and elected leaders agree that the COVID-19 pandemic is causing economic activity to slow and are acting proactively to curb anxiety for both businesses and consumers. The Government of Canada has unveiled a plethora of relief funds in support of small businesses and citizens; the Canada Emergency Response Benefit, subsidies for small businesses, increased childcare benefits, and support for students and vulnerable populations, just to name a few. The Government relief efforts topped $90 billion at the end of March and they have also been in discussion with major banks to further ease the burden on Canadians.

On March 27th, The Bank of Canada lowered the overnight rate to 0.25 per cent, down from 1.75 per cent in the 2nd week of March.  Other major banks have since announced that they will be lowering their credit card interest rates for customers under financial pressure caused by COVID-19 and offering Government backed loans for small businesses as early as next week.  This is in addition to their already implemented mortgage payment deferrals.

While these efforts will help many people during this crisis, critics wonder if it will be enough. Frances Donald, Chief Economist with Manulife Investment Management states that Canada’s economy was already showing warning signs in 2019 with a Q4 growth of only 0.3 per cent. Between a collapse in oil prices and a housing market bubble on the verge of bursting, Canada could have been already heading towards a mini-recession before the outbreak. Over 3 million people have applied for EI and the Emergency Response Benefit since the outbreak, setting “historic levels of devastation in the labour market.”

National Housing Market Trends

There is no single consensus on how COVID-19 will affect Canada’s housing market. Even prior to the outbreak, conflicting headlines about housing bubbles and whether or not we were in one shows that there is a dichotomy between those who anticipated a burst and subsequent recession, and those who believed that the Canadian housing market was generally balanced between supply and demand, despite regional differences.

Time will tell if Canada’s presumed bubble will burst over the following months, but what we know to be true is that the novel coronavirus is changing the way we buy and sell real estate. The Alberta Real Estate Association, in an attempt to minimize face-to-face interactions, has officially banned all of its members from conducting open houses and encouraged agents to use “virtual tours, video-conferencing and digital contract signatures.”

In addition to buyers and listers pulling back from the market, we are also starting to see fallout from lenders as mortgages get cancelled before closing dates. Ron Butler of Butler Mortgage claimed this happened to a client of his after the lender conducted a routine check and discovered the client had been laid off indefinitely. Bank analyst, Robert Hogue claims that the impact of physical distancing and an economic fallout could see home resales at a 20 year low.

Calgary, Toronto, and Vancouver – The Numbers

According to John Pasalis, President of Realosophy Realty in Toronto, Canada’s biggest markets were preparing for a “sizzling house-hunting season” prior to the virus entering Canada.  In February, we saw a 27% increase on home sales compared to February 2019 and a 15 per cent increase in the national average home price. Pasalis says, “that outlook has now dimmed.”

The Calgary Real Estate Board (CREB) claims that sales activity in Calgary has fallen 11 per cent in March 2020 compared to March of last year, the lowest level since 1995.  The number of new listings has also fallen 19 per cent. Chief economist Ann-Marie Lurie at the CREB is quoted saying, “This is an unprecedented time with a significant amount of uncertainty coming from both the wide impact of the pandemic and dramatic shift in the energy sector.” Because of this, Alberta is expecting price declines to be higher than originally anticipated.

In Toronto, Canada’s largest housing market, the first half of March recorded a surge in sales which were up 50% compared with the same period in 2019, highlighting the strength in Toronto’s housing market. However, after physical distancing measures were introduced in the latter half of the month, sales activity fell a significant 37% compared with a year earlier, and new listings had also dropped 33% from the 2019 figures.  As we are still in the early stages of the pandemic, Toronto Regional Real Estate Board (TRREB) president Michael Collins states that “sales figures for April will give us a better sense as to the trajectory of the market while all levels of Government take the required action to contain the spread of COVID-19.”

Similarities were seen in Vancouver where the first two weeks or March were recorded as the busiest of the year, according to the Real Estate Board of Greater Vancouver’s President (REBGV), Ashley Smith
. While March 2020 showed a 46 per cent increase over a record low March 2019, most of the sales were already in process before the Government of BC declared a state of emergency. By the end of the month, sales were 20 per cent below the 10-year average.

The Future Is Unclear

The most optimistic view at this point is that self-isolation will bring the pandemic under control so that businesses can re-open and workers can begin to return to their jobs by this summer. Doug Porter, chief economist at BMO Capital Markets, stated in a report, “We believe the fiscal steps are enough to help propel the economy into a forceful recovery in the second half of the year.” But this viewpoint is not shared by everyone.  Frances Donald is concerned that current programs, which are only in place for a three-month period, may not be enough if the majority of those laid off are not rehired. He is quoted:

“We are living through history that will end up in textbooks and case studies as we analyze central bank policy, how effective it is, how quickly central banks should be reacting, and whether or not we look back and say: ‘They acted too late,’ ‘too early,’ or ‘right on time.’”

From BNNBloomberg: https://www.bnnbloomberg.ca/rbc-cuts-prime-lending-rate-after-bank-of-canada-move-1.1400320

Normac is taking precautionary measures to protect our staff, clients, and to do our part in preventing the further spread of COVID-19. Read more about our efforts here.