The Quick Take: June 8, 2018
Non-Residential Building Permits Continue to Slow
“The value of non-residential building permits declined in April, which continues the trend seen so far in 2018. There is enough work already in the pipeline to sustain a solid increase in building construction this year, but the decline in building permits we are seeing right now bodes ill for building construction in 2019.”
Total non-residential building permits issued in April decreased 3.0 per cent year-on-year. Last April was the beginning of a strong upswing in building permits, but since October, they have been on a consistent downward trend.
Institutional permits drove the year-on-year decline, and industrial building permits were flat year-on-year. The weak industrial building permits are unexpected given low industrial vacancy rates, and we would not be surprised to see some growth in this sector.
Commercial building permits, which usually herald the construction of office and retail buildings, increased by an impressive 36.4 per cent year-on-year. Commercial building permit growth was overwhelmingly centered in Greater Vancouver, where the office vacancy rate was 5.4 per cent in Q1.1 Greater Vancouver was responsible for more than half of the total increase in commercial building permits over the past year.
Overall, we are seeing the speed of building permit issuance easing. It is important to keep in mind that construction usually does not start for some time after a permit has been issued. Because building permits were so strong in 2017, there are enough projects in progress to promote building construction this year. This is consistent with our latest Canadian Outlook, which forecasts that businesses will increase their real spending on non-residential buildings by 2.3 per cent in 2018. However, because building permits are now so much slower, we will not see the same growth in construction in 2019.