Construction outlook: Recovery meets continued uncertainty
The fall edition of our Construction Quarterly Economic Insights explores the contrast between near-term headwinds and longer-term opportunities from major projects, evolving policies, and international trade.
Looking ahead to 2027, infrastructure investment and major projects offer opportunities for growth, though much will depend on when announced investments translate into construction activity.
Key insights:
- Economy rebounded in Q2: Real GDP grew at an annualized rate of 3.3 per cent, led by a surge in auto exports as production resumed, as well as a broad-based recovery across the economy.
- Construction activity improved: Construction GDP increased one per cent in Q2 following two quarters of decline. Building intentions remained mixed, with overall permit values up 2.1 per cent, driven largely by the Peter Gilgan Mississauga Hospital, while multi-residential and industrial permits declined.
- Construction costs remain elevated: Non-residential building costs rose 3.5 per cent year-over-year in Q2, with steel-intensive divisions increasing by more than eight per cent. Higher fuel and energy prices, tariffs on U.S. imports, and new wood cabinet duties continue to add pressure across the supply chain.
- Looking ahead to 2027: The construction outlook remains mixed. Residential activity is soft in major Canadian markets, while new infrastructure, energy, and data-centre projects are progressing at varying speeds. New tax incentives support investment, but tariffs and fuel prices continue to create challenges.
What’s ahead for the industry?
Federal investment incentives, including the Productivity Mega Deduction and the rollout of the $51 billion Build Communities Strong Fund could support construction activity in 2027. However, contractors must also navigate evolving Buy Canadian and provincial procurement policies, rising energy costs and ongoing trade uncertainty.
Major projects, including GO Expansion, Meta’s Sturgeon County data centre and the potential second phase of LNG Canada, will be important to watch as investment decisions and construction timelines take shape. Meanwhile, labour challenges persist, with more firms concerned about recruiting skilled workers than an overall shortage of labour. Although business sentiment was generally positive in the third quarter, cost pressures and uncertainty remain. The pace at which policy commitments and project announcements translate into actual construction will be critical to the industry’s outlook.
For more information on this report or the work CCA is currently focused on to address the issues covered, please email Yunhan Liu, Analyst, Economics and Policy.