Posthaste: Developers lament construction costs in Canada, but it could be a lot worse

Canadian cities fall in the middle of the pack for construction costs globally. Photo by Luke Hendry/SunMedia

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Construction costs have been a major obstacle for growth in some of Canada’s big cities, but those costs fall in the middle of the road compared to the world’s urban centres.

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Toronto (No. 41), Vancouver (No. 46), Calgary (No. 48) and Montreal (No. 50) each fall into the middle of the pack in Arcadis NV’s list of the 100 most expensive cities for construction.

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Interest rates, material costs and red tape are among the factors developers lament about Canadian construction, but Arcadis believes the outlook for Canadian development is positive.

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“There is a huge pipeline of work, and a large amount of infrastructure spending has already been committed,” Catherine Bruen, business unit leader of cost and commercial management at Arcadis, said in a news release. “This should hopefully lead to a return to growth across the construction sector in 2025 and beyond.”

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United States tariffs on Canadian products threaten to further slow construction down, but the federal government has taken steps to reduce costs for developers.

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The federal government last spring removed the GST on new rental housing construction projects, which 70 per cent of developers believe will help with long-term supply, according to Canada Mortgage Housing Corp.

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The government is now promising the “most ambitious housing plan since the Second World War,” with the goal of building 500,000 new homes annually.

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Prime Minister Mark Carney is planning $10 billion in financing for affordable home builders, cutting red tape and introducing tax incentives to spur construction.

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But the political climate is making construction more difficult in the near term.

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“Any growth potential could be tempered by a couple of headwinds, namely the prospect of potential delays to project approvals until the dust settles after April’s election, plus the ongoing tariff trade dispute with the U.S.,” the Arcadis report said.

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Geneva, London, Zurich, Munich and New York City were the five most expensive cities for construction.

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But there is room for optimism, according to Arcadis, which believes construction is ready for a rebound.

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“Despite many challenges, there is a clear horizon of opportunity,” Paul Maddison, acting global head of cost and commercial management, said in the report.

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“Even with slower growth, most development markets show strong underlying demand, whether for modern, near-zero-carbon office space, data centre capacity or housing. Demand for data centres, for example, has driven rents high enough to offset construction cost premiums.”

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The U.S.’s loss could be Canada’s gain for the job market.

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A burst in interest for U.S.-based jobs among foreigners has plummeted to levels not seen since before the COVID-19 pandemic, according to new data from Indeed Inc.