Construction

What's included in this industry?

The construction industry includes establishments that are primarily engaged in constructing, repairing and renovating buildings and engineering works, and in subdividing and developing land. They sometimes work as sub-contractors for other companies. Firms in this industry may be responsible for constructing large projects from start to finish, or working on part of a project (for example, drywalling or painting).

The construction industry includes many different types of activities

About half of the GDP¹⁵ in this industry comes from putting up buildings, such as houses, condos, office towers and shopping centres. Residential building projects account for about 38% of the industry’s GDP, while 13% originates in non-residential building construction.

Another 29% of the industry’s total value added comes from engineering construction such as building roads, highways and airstrips; gas and oil facilities; dams and irrigation projects; railways, telegraph and telephone lines; and other types of engineering projects. Repair construction (on buildings as well as roads, highways and other projects) generates about a fifth of the value added to the economy by this industry.

What's happened since 1990?

In 2008, contruction became the largest employer in the goods sector

British Columbia’s construction industry has seen phenomenal growth in recent years. In 2008, the industry moved ahead of manufacturing to become the largest employer in the goods sector, a position it has never held in the past.

Employment in the industry doubled between 2000 and 2008, outpacing real GDP growth, as investment in new buildings and infrastructure soared. Construction is now the third largest employer in the province, providing jobs to nearly 10% of BC’s workforce.

The number of people working in the construction industry has doubled since the turn of the century

One in 10 BC workers were employed in construction in 2008, the highest percentage on record¹⁶

Labour productivity in construction has declined

However, this very rapid rise in (mostly full-time) employment, well in excess of GDP growth in the last two years, indicates that labour productivity in the industry has declined. One possible reason for this may be that construction firms have been facing a worker shortage, and have had to hire people with less skill or experience to complete their projects.

The recent deterioration in labour market conditions, together with the completion of a number of large infrastructure projects, may reduce some of the pressure on these firms. With a pool of more experienced workers to draw on, productivity in the industry could return to more normal levels. However, it’s possible that other factors are at play, affecting labour productivity in the industry.

Why has the industry grown so rapidly?

Many factors have played a role in the industry’s recent growth, including a red-hot housing market, a growing population, generally robust economic conditions, and preparations for the 2010 Olympics.

A booming housing market...

Construction is a boom and bust industry. When the economy is growing, the industry usually does very well, but when times are tough, new construction projects tend to be put off. Builders often borrow money to finance big projects (and in the case of houses, homeowners usually have to take out a mortgage to pay for their home), so changes in consumer confidence and the cost of borrowing can have a big effect on this industry.

During the 1980s, many new housing units were constructed in the province. So many were built that the supply of new houses and condos eventually exceeded the demand for them and in the early 1990s, the market for new housing began to slump. The number of new housing projects under construction fell sharply throughout the decade, reaching a low of about 14,400 units by 2000. However, the province’s population continued to grow, putting pressure on the stock of existing housing.

The residential construction industry has gone through two boom and bust cycles in the last 30 years

Eventually builders became more optimistic about the prospects of selling newly constructed housing. In the early years of this decade, housing starts rose rapidly as home-builders scrambled to satisfy pent-up demand. From 2002 to 2007, BC’s housing market was booming. The demand for new housing seemed almost insatiable. Condos and other new housing units were being sold before work on many of these projects had even commenced.

Investment in new apartments and condos exceeded spending on detached houses for the first time ever in 2008

Housing prices soared, and as the cost of new housing continued to climb, the market for condos, which are usually less expensive than single family dwellings, was particularly strong. Investment in new apartments and condos increased to seven times the 2000 value by 2008, and exceeded spending on new detached houses for the first time ever in that year.

Soaring prices played a role in the increase in investment spending, but even when price effects are taken into account, the extent to which new housing investment increased during the last few years is quite remarkable. When total investment in new housing is restated in constant 2002 dollars, it is still more than double the 2000 value.

A growing population...

One reason for the big increase in spending on new housing was population growth. BC’s population has expanded 34% since 1990. People need somewhere to live and when builders started constructing more new housing in the early part of this decade, there were a lot of potential buyers. Some were already living in BC, others were newcomers to the province, or were purchasing a second home as an investment property or a place to live in while visiting the province.

A growing population doesn’t just boost the demand for housing. It also puts pressure on other types of infrastructure. When people move into an area, they need a place to live, but they might also need hospital care. Those with children will use daycares, schools or colleges. People shop in malls and at supermarkets, they exercise at gyms and recreation centres, they drive on highways and over bridges, and they work in office buildings and factories.

If there aren’t enough schools, hospitals, or other facilities to meet the needs of the population, they have to be built. Old buildings are torn down and new ones are constructed. Offices and even old stores or warehouse buildings might be converted into apartments or condos, and new bridges and improved highways are constructed to handle increased traffic flows. Sometimes it’s not population growth so much as the passage of time that makes it necessary to repair or upgrade existing buildings and infrastructure.

A strong economy...

General economic conditions play a major role in the fortunes of this industry. Most construction projects cost a lot of money to build, and individuals and businesses are more likely to invest in new projects when the economy is strong and they are confident about the future. When times are good, companies may decide to build new office buildings, stores, manufacturing facilities, mills, mines, power lines and other fixed assets such as oil & gas facilities or pipelines. They usually hire construction firms to build these projects. When the economy is slumping, investment plans are often put on hold.

Spending on engineering projects and residential buildings has doubled

...and preparations for the 2010 Olympics have kept builders busy in recent years

The construction industry has also benefitted from preparations for the Olympics which will be held in the Vancouver/Whistler area in February 2010. Major upgrades of the Sea-to-Sky highway, which links West Vancouver with Whistler, are underway. A new light rapid transit line connecting downtown Vancouver and Richmond (the Canada Line) has been constructed and was officially opened in August 2009.

The expansion of the Vancouver Convention and Exhibition Centre, which will function as a media centre during the games, has been completed, and there has been substantial investment in new venues for Olympic events, such as the Richmond speed skating facility. A housing development has been constructed in Vancouver to provide accommodations for some of the athletes participating in the games.

Preparations for the 2010 Olympics have boosted spending on new buildings and transportation infrastructure in the province