CALGARY’S FRAGILE CONSTRUCTION BOOM

Rebounding Despite The Speedbumps

BY JOHN HARDY

The encouraging sign, including massive cranes and hectic activity at sprawling new subdivision construction sites, are everywhere! While some experts are cautious about calling it a Calgary construction boom, there is definitely positive momentum.

The various stages of multi-family high-rise condo and rental apartment tower residential construction, as well as commercial construction like the recently completed Calgary Cancer Centre, the massive Amazon YYC warehouse and other commercial projects, are exciting indicators.

When it comes to residential construction, recent CMHC numbers show a large shift in the type of Calgary housing being built. About 45 per cent of housing starts being in multi-unit housing, many of them purpose-built for rentals. Some specifics are: the cost of construction on apartment buildings has increased 13.3 per cent year-over-year, while single detached has increased 14.3 per cent and townhouses have gone up 15.3 per cent.

Despite broadsides like spiked mortgage rates, jittery consumer confidence, builder and developer construction speedbumps like skilled labour shortages, high material costs, the limited availability of supplies and equipment, as well as two-plus years of pandemic disruptions, Calgary’s residential construction reflects a housing market that is strong, resilient and even rebounding.

The numbers show that the city continues to be hectically busy with large volumes of permit applications and inspections. Last year, more than 18,855 building permits were issued, for a total construction value of $5.5B. While that number is slightly lower than the permits issued in 2021, the totals are still well above the 10-year median of 16,598. Another positive residential construction stat is that Calgary’s housing real estate set records last year.

“Calgary’s residential construction trend was positive, regardless of the rising interest rates,” says the respected Shane Wenzel, CEO and president at Shane Homes Group of Companies. “We felt a slight dip last summer and in December, but sales have remained above average over 2022. And 2023 sales appear to have taken off even faster.”

According to Dave Hooge, COO of Jayman BUILT, “Sales, or sometimes the lack of sales, impacts housing starts. Other factors including affordability, migration and homebuilder confidence can impact the appetite to start spec homes and/ or larger multi family projects.”

He is upbeat that, despite some lingering challenges, residential construction is rebounding. “Fortunately, the residential construction industry holds much potential to stimulate recovery, thanks to its potential to create jobs. Additionally, Calgary, and all of Alberta, has the advantage of affordability, attracting significant net-migration. It has been integral in a strong Alberta market.”

Wenzel emphasizes migration is a major boost for residential construction and Calgary housing starts. “There’s a substantial migration to the province of Alberta to the tune of 50,000 new residents. The largest migration has come from Ontario, as people are exhausted with the expensive housing prices there.”

Another encouraging Calgary housing stat is recent StatsCan numbers crunching, which showed that Alberta had a net gain of 19,285 people from interprovincial migration in Q3 2022. The highest net gain in 43 years! Forecasts suggest that all segments of Calgary’s homes market are likely to see strong demand, as long as migration into Alberta remains high.

Most developers, builders and residential real estate experts agree about some key ‘lingering challenges’ when it comes to Calgary housing and residential construction.

While it is mostly in the rearview mirror, the pandemic disruptions impacted home builders in many ways, like project delays. “During COVID, some workers simply refused to work on sites with other people, and many moved to different provinces, reducing construction’s already strained and tight skilled labour force,” Hooge says.

“Even with the work disruptions during the pandemic, our industry banded together to find new ways to complete construction and keep everyone safe. We also found more innovative ways to interact with customers, while they stayed at home, like digitalizing our industry at a faster pace than we might have seen otherwise.”

Residential construction also took a hit from the supply chain problems, which ultimately caused material shortage and, as things get slowly sorted out, continue to impact the costs of construction.

By the end of last year, residential construction costs in Calgary had jumped by 14 per cent, mostly due to fuel, concrete, steel and equipment price increases, underscoring some industry concerns