Construction Industry Bracing for Tough Times in 2017
28 Oct 2016

“It seems like every 10 years there’s a little bit of a house cleaning or a culling of the herd. I think we’re in it. I think Edmonton comes out of it 12 months, 16 months from now stronger as a construction community.” Contractors should take advantage of the slowdown to improve their efficiency, he said.

Bentley agreed higher oil prices are needed to boost the construction industry, but he said he’s already talking to developers who feel it’s a good time to build because prices are cheap. A second report, from the Canada Mortgage and Housing Corp., predicted that while construction of single-family homes in the Edmonton area will rise modestly next year, multi-unit housing starts will drop. Suburban companies might move downtown to take advantage of cheaper office space as highrise towers are completed, which, along with residential conversions, could attract millennials and others to the urban core. A report by consultants PwC indicates that while Edmonton’s real estate market is softening, it’s still stronger than other Alberta markets.

“Everything’s kind of finishing here … . We keep hearing about more schools, but not a lot of big, bulky museum-, arena-type projects at this point.”

Association members are waiting for the province to announce infrastructure spending plans, but there’s nothing on the horizon in Edmonton to match Calgary’s ring-road completion and cancer centre, Bentley said.

“We’re going to see some bankruptcies for sure … in the coming months, in Edmonton, in Calgary, Grande Prairie, Lloydminster.”

“The cash burn is up for a lot of these heavy equipment contractors,” he said. Companies that build roads or move earth for energy projects are often hit hard because they have expensive machinery to maintain, Bentley said.  “Downtown, right now, we’re coming out of a big build. We have the arena, we have some towers going up. The big guys are coming off a big work program and they’re looking to continue to fuel (orders), and it’s tough.” He estimated two-thirds of the companies on the association’s board have reduced staff.

Bentley, a senior vice-president with insurance broker Marsh, said profit margins are being squeezed as firms cut prices to the bone to win jobs. “As a risk-management guy who looks at financial statements which show the healthiness, or not, of companies, we’re concerned.”

“I see it as, we come out of this downtown building boom, what are we doing to fill it up? Six, seven months from now, it will look a little different in Edmonton,” he said Wednesday. The city should weather the downturn better than Calgary, with its 22-per-cent core office vacancy rate, but the completion of several major projects means the local construction industry faces a crunch, Dave Bentley says.

Increased competition and tough times in the oilpatch mean some Alberta contractors will likely go bankrupt over the next few months, the president of the Edmonton Construction Association says. 

 

– Taken from Gordon Kent of the Edmonton Journal October 26, 2016