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A bounce rather than a break

In the year since I joined On-Site, it has been almost impossible to go more than a day or two without hearing something about labour shortages, material cost increases (and shortages), inflation and lending rates, so it should come as no surprise that those topics take the lead in our 2023 forecast that starts over on page 11. And while I would never advise anyone to not worry about these interwoven individual topics, I’m also very hesitant to suggest that the sky is falling – sorry Chicken Little.

Far too many years ago to count, I sat in on a very interesting lecture that explained the more we examine a topic, the more complex it becomes. It was a lesson that stuck, and has shaped my thinking, especially when analyzing situations and looking for paths forward. I think the lecture is why I am not as worried about the non-residential construction sector, and even the multi-residential high-rise sector, even when faced with dire headlines about prices and lending rates.

Yes, as I write this, inflation is sitting at more than double the 3.14 per cent average rate experienced between 1915 and 2022. Yes, there are still price fluctuations, supply chain issues, and nobody can seem to find enough skilled workers. And yes, project plans are being impacted with some projects cancelled and others delayed or reworked. But that’s not the full story.

While attending the recent Groundbreak event put on by Procore, I heard several comments from companies who were beyond capacity and were thus hesitant to bid on new work. With labour pools stretched thin, delays in having to bid on projects may actually be a blessing in disguise for these contractors. They will now have a chance to work through some of what’s already in their healthy backlogs without the risk of losing out on those future projects that they either would not have bid on, or would have stretched their resources to the point of possibly breaking.

With fewer concurrent projects, don’t be surprised if you see some catch-up happening in the supply chain as well. With any luck, we might even see some easing of prices for products that are available.

Of course, don’t expect a few delayed projects to derail the bulk of work, or to reduce the amount of spend in the sector. Between the ongoing projects that will continue through 2023, projects that are funded and committed to begin over the next 12 months, and others jobs that will hit the RFQ stage next year, machines will be moving, sites will be active, and more work will be coming. Not only that, but with inflation impacting prices, many companies will likely find themselves posting higher average per-project revenues this year over last year or the year before.

And the RFQ tap won’t get turned completely off any time soon. Between our country’s massive infrastructure deficit – anywhere from $110 billion to $570 billion, depending on whose numbers you choose to believe – and immigration targets that have been recently increased by an additional 25 per cent, we cannot escape the ongoing need for new and renewed buildings and structures. Even in the face of a possible recession, this sector is well positioned for a soft bounce rather than a rough ride.

Until next time, stay safe and do good work.

Adam Freill / Editor afreill@annexbusinessmedia.com

MEET OUR CONTRIBUTORS FOR THIS ISSUE

MARY VAN BUREN / President, Canadian Construction Association

On construction trends to watch over the next 12 months:

“New appreciation for skilled trades combined with an infusion of new Canadians will help propel diversity and inclusivity forward, with greater representation from women, new Canadians, Indigenous and other equity-seeking groups.”

JACOB STOLLER / Principal, StollerStrategies

On the use of heavy equipment simulators for training:

“As remote control sees wider adoption in construction, a day may come when a simulator-like environment becomes the predominant method for controlling live machinery.”

DAVID BOWCOTT / Managing Director, Construction, at NFP Corp.

On risk reduction and enhanced productivity:

“The digital twin is the convergence of all data and technology from all phases of the built environment (design, construction, and operations) delivered through a unified and federated platform, and it can be used to manage risks.”

ERIN CUTTS AND DAVID MAJOR / Borden Ladner Gervais LLP

On price escalation clauses for construction:

“When drafting supplementary conditions involving material price escalation clauses, parties should also consider whether storage costs may be incurred, and whether the parties are prepared to share costs that allow materials to be purchased at quoted prices at an earlier stage.”

VOLUME 67, NO.7/December 2022 www.on-sitemag.com

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