2012 ocs state of the industry and outlook conference...

n March 7th over 250 industry stakeholders attended the Ontario Construction Secretariat’s (OCS) 12th Annual State of the Industry and Outlook Conference. In addition to providing

attendees with a view of what’s in store for Ontario’s economy and construction industry, this year’s confer-ence also focused on the booming mining opportunities in North-ern Ontario.

Christine Kaszycki, the Assistant Deputy Minister for the Ring of Fire Secretariat, provided an overview of Ontario’s “Ring of Fire”, located north-east of Thunder Bay. She noted that the Ring of Fire has the potential to become one of the most signifi-cant mineral developments in Ontario in over a century. Huge opportunities exist for the trades in both mining-related and infrastructure work as mining developments in the Ring of Fire come on stream.

Mike McCann, General Manager of Strategic Projects at Vale, provided an overview of the firm’s infrastructure projects, noting that the company plans to invest $3.4 billion at its Ontario opera-tions over the next few years. Mike noted that there would be heavy demand for the skilled trades for this year, peaking at close to 2,000 workers in 2013/2014.

EYE ON ICI N E W S L E T T E R

Ontario Construction Secretariat

1 EVENT RECAP

6 MAKING SENSE OF ECONOMIC DATA

9 REGIONAL BUILDING PERMITS UPDATE

11 UPCOMING EVENTS

Doug Porter, Deputy Chief Economist at BMO presented his economic forecast. Like last year, attendees were impressed by Doug’s ability to interpret complex economic information and present it in an easy to understand manner. According to his forecast, Ontario’s economy will grow at a moderate pace over the next few years, there will be a soft landing for Canada’s housing markets, interest rates will remain low and the dollar will stay strong. Doug also noted the trend of declining government capital investment and climbing private sector non-residential investment.

Northern Lights Shine Brightest - OCS Annual State of the Industry and Outlook Conference

EVENT RECAP ISSUE JULY 2O12

INSIDE THIS ISSUE

2012 OCS State of the Industry and Outlook Conference - Hilton Toronto Hotel

EVENT RECAP

Continued on Page 2

Christine Kaszycki (Left) and Mike McCann (Right)

JULY 2012 1

Gearing up for Bargaining - OCS Collective Bargaining Symposium

onsistent with its mandate to help facilitate collec-tive bargaining, the OCS coordinated a Collec-tive Bargaining Symposium on March 7th-8th. The symposium provided an opportunity to share information, knowledge and best practices about

collective bargaining and labour relations in construction.

On the first day, attendees heard from two separate panels. The first was moderated by Reg Pearson of the Ministry of La-bour and included Brian Foote (former head of the General Contractors Section, Toronto Construction Association) and Pat Dillon, Business Manager of the Provincial Building and Con-struction Trades Council. The panelists provided an historical perspective on bargaining in construction.

The second panel was moderated by Joe Liberman of the law firm Mathews Dinsdale & Clark, LLP, and included Richard Lyall of the Residential Construction Council of Ontario, Bill Nicholls of the IUPAT and John Grimshaw of the IBEW CCO. The par-ticipants shared their experiences with bargaining and provided some best practices to the group including final offer selection, the Carpenter’s protocol and dispute resolution techniques.

Day two focussed on economic data and its relevance to the bargaining process. John O’Grady of Prism Economics and Analysis identified 5 key factors which impact bargaining: 1) the rate of inflation, 2) comparator settlements, 3) recent hours of work, 4) pipeline of pending work and 5) union share in specific markets.

Attendees then had an opportunity, through a facilitated break-out discussion, to address whether the industry was equipped with the proper information to guide decision-making in collec-tive bargaining. Finally, the event wrapped up with a discussion of what the main issues, challenges and opportunities were for the next bargaining round. Overall, the event was well attended and participants felt that it was a worthwhile exercise.

EVENT RECAP

Continued from Page 1

n February 16th, the OCS hosted a Water/Wastewater Workshop, which built on prior research conducted by the OCS. The event provided an opportunity for unions and contrac-

tors to come together and discuss the results of the research and formulate a go-forward strategy. The group developed a template of terms and conditions which labour and contractors can utilize to improve market share in this sector.

Water/Wastewater Workshop

Katherine Jacobs, the OCS Director of Research and Analysis provided her perspective on Ontario’s construction industry for 2012. In her estimation, 2012 would be a positive year for commercial and industrial construction while being a slower year for the institutional sector, given the cessation of the stimulus program.

Economist Doug Porter of BMO Capital Markets

OCS’ Katherine Jacobs

Record attendance at this year’s State of the Industry & Outlook Conference

2 JULY 2012

n March 20th, the OCS hosted its annual Government Reception at Queen’s Park in Toronto. The event was attended by govern-ment officials, cabinet ministers and MPPs.

The OCS used this opportunity to build awareness and gather support for its Future Building exposition. Sean Strickland, OCS CEO, addressed attendees, stressing the strong commitment of the unionized construction industry towards training the journey-persons of tomorrow. He noted that unionized construction has invested over $200 million on training facilities and spends $40 million annually on apprenticeship, skills upgrade and safety training.

Linda Jeffrey, the Minister of Labour, was on hand to provide greetings as was Minister Glen Murray of the Ministry of Training, Colleges and Universities.

Building Awareness for the Unionized Construction Industry

Linda Jeffrey, Minister of Labour

OCS’ Stew Stevenson with OCS Directors Bill O’Riordan (left) and Pat Dillion (Right) 2012 OCS Government Reception - John B. Aird Gallery in Toronto

Networking at the 2012 OCS Government Reception

Glen Murray, Minister of Training, Colleges and Universities (right)

JULY 2012 3

EVENT RECAP

(L - R) Jeff Irons (IBEW) , Jim Wright (OCS), Christina Rettig (MTCU) , Steve Martin (IBEW)

ith the growing demand for skilled tradespeople and the baby-boomers starting to hang up their hardhats

for good, it is as important as ever to inform youth about opportunities available to them in the unionized

construction industry. To do its part, the OCS once again hosted our Future Building ca-reer exposition. Held from March 29th to 31st at the Better Living Cen-tre in Toronto Ontario, the event drew close to 8,000 participants over the three day period. For many of the youth, the event provided their first opportunity to get some hands-on exposure to the trades. Minister Glen Murray from the Ministry of Training Colleges and Uni-versities and Laura Alabanese, MPP for York-South-Weston brought greetings and shared a few kind words about Ontario’s skilled union-ized construction workers. MPPs Julia Monroe and Garfield Dunlop toured the show. There were 30 exhibitors at Future Building, including representatives from 19 unionized skilled trades. Through interactive activities, the exhibitors went all out to deliver a hands-on experience for the youths in attendance. Future Building was a remarkable success. As one teacher put it “[t]he kids loved it and I think learned a lot. It was a unique opportunity to explore pathways that students typically wouldn't have the opportu-nity to experience....”

Highlighting Career Options - Future Building 2012

4 JULY 2012

MPPs Laura Albanese and Glenn Murray cut the ceremonial sheet metal ribbon to start Future Building 2012 in Toronto

Labourers

Carpenters

Pipe Trades

Sheet Metal Workers

EVENT RECAP

Operating Engineers

JULY 2012 5

MPP, Julia Munroe (left)

MPP, Garfield Dunlop (left)

EVENT RECAP

Mayor Ford & City Councillors recognize the Hammer Heads Program

Toronto City Councillors with the Hammer Heads Electrical Workers

Ironworkers

Ironworkers Tile, Terrazzo & Marble Operating Engineers

Bricklayers & Stone Masonry

Pipe Trades

Ontario Power Generation

Lincoln Electric

Carpenters

Painters & Glaziers

Photography by Janis Rees / Kaleidoscope Photography for State of the Industry & Outlook Conference ‘12, OCS Government Reception 2012, and Future Building 2012

MAKING SENSE OF ECONOMIC DATA

n this age of readily available information, we are seem-ingly bombarded with a slew of reports about the performance of the economy. The news is filled with stories about GDP, employment, the housing market and

the like. Which information is relevant for the construction in-dustry, and worthy of our attention? Are there certain data sets that point directly to changes in capital investment and there-fore an increase or decrease in construction activity? This arti-cle identifies key variables which are useful when you are trying to get a sense of whether investment will increase, decrease, or stay the same in any given year.

Interest rates represent the cost of borrowing for firms. The higher the cost, the less incentive there is to invest. The prime business rate - the rate banks charge to their most creditworthy customers - is currently at a very low 3.0%. Most forecasters expect the Bank of Canada to start raising interest rates some-time next year.

Interest Rates

Ontario’s budget provides a reasonable starting point for gauging the path of institutional investment. We compared infrastructure expenditure plans contained in provincial budgets over the past ten years with actual institutional investment data, accounting for the fact that only part of the planned spending would be counted as institutional investment.

Institutional Sector Indicators

Key Observations and Implications:

Over the 10 years, actual institutional investment has been about $900 million higher, on average, than what was planned for in the budget.

The level of planned capital expenditures contained in this year’s budget was fairly strong, suggesting some upside risk to the notion that institutional investment will fall this year.

Population growth is another factor which helps determine insttutional investment. Since the beginning of the millennium, the five fastest growing Census Metropolitan Areas (CMAs) have been Guelph, Oshawa, Peterborough, St. Catharines and Barrie - areas in and around Central Ontario. Institutional in-vestment has grown much faster in these CMAs than in the province overall.

Manufacturing sales, industrial capacity utilization and industrial availability rates are key data sets to monitor for insight into industrial investment intentions. Current trends in these indica-tors are pointing to improved investment in the industrial sector. Manufacturing sales represents the revenue of firms operating in the industrial sector. More revenue equates to more investment. Sales were up 35% from their recession low in April, but still well below levels seen earlier in the millennium.

Industrial Sector Indicators

Manufacturing Sales: Trend versus a year ago

Points to: MORE Investment “Most forecasters expect the

Bank of Canada to start raising interest rates sometime next year”

Gross Domestic Product (GDP) measures the overall economic activity of a region. Non-residential construction investment “lags” GDP, meaning that it tends to ramp up or gear down after there are changes in the broader economy. There can be a considerable amount of time which elapses between the start of a large-scale investment project and its end, thus leaving lots of time for developments in the overall economy. Forecasters are expecting 2.0% growth in GDP both this year and next, about in-line with average growth since 2000.

Gross Domestic Product

By Rishi Sondhi Construction Information Coordinator OCS

6 JULY 2012

The industrial capacity utilization rate meas-ures how rigorously resources in the indus-trial sector (i.e. facto-ries) are being used. The higher the rate, the more existing resources are being strained and the greater the need for investment. Like manufacturing sales, capacity utilization has trended higher, but is still low relative to pre-recession levels.

Figure 1: Manufacturing Sales and Industrial Investment, Ontario

Industrial Capacity Utilization: Trend versus a year ago

Points to: MORE Investment

The industrial availabil-ity rate measures the amount of available industrial space in a given region (similar to a vacancy rate). The more space available, the less incentive there is to construct new buildings. This data set is most useful when used to give a snapshot of current market conditions, but does have some predictive value.

Industrial Availability Rate: Trend versus a year ago


There are a host of variables which trend together with com-mercial investment. Below are the key ones.

Retail sales were up 2.5% year-over-year in April. Increased sales mean that retailers’ revenue is growing, a positive indicator for potential retail expansion.

Commercial Sector Indicators

Retail Sales: Trend versus a year ago


Figure 2: Retail Sales and Commercial Investment, Ontario

Higher stock values mean that firms are wealthier and more money is able to be raised by large firms for capital expenditures. The European debt crisis has driven down the value of stock markets, potentially dampening money available for commercial investment.

Pension funds are relatively large players in the commercial real estate market, with CB Richard Ellis estimating that pension and insur-ance funds accounted for roughly 8% of total Canadian com-mercial real estate sales in 2011.

Value of Pension Fund Financial Assets: Trend versus a year ago

Points to: FLAT Investment



Continued on Page 8

Stock Market Values: Trend versus a year ago

Points to: LESS Investment

‐40

‐30

‐20

‐10

0

10

20

30

40

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Annual Growth (%)

Industrial Investment

Manufacturing Sales

JULY 2012 7

Source: Statistics Canada

25

27

29

31

33

35

37

39

41

43

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Commercial Investment (Left Hand Scale)

Retail Sales (Right Hand Scale)

$ billions $ billions

Source: Statistics Canada

The overall office va-cancy rate has trended lower in the province. However, this trend is narrowly concentrated in the GTA. Lower vacancy rates imply that there is less avail-able office space for companies, increasing the incentive to construct new office buildings.

Office Vacancy Rates: Trend versus a year ago


A declining unemploy-ment rate for the services sector implies stronger employment growth in services in-dustries, potentially leading to investment in new office space. However, the cur-rent flat trend in the indicator points to no change in investment.

Services Sector Unemployment Rate: Trend versus a year ago

Points to: FLAT Investment

New residential invest-ment creates new com-munities and neighbour-hoods which generates a demand for various commercial buildings (i.e. restaurants and retail stores). Resi-dential investment has been strong, averaging 11% year-over-year growth in 2011.

Residential Investment: Trend versus a year ago




8 JULY 2012

HIGHLIGHTS Non-residential construction activity lags fluctuations in the broader economy. Forecasters are expecting 2.0% economic growth both this year and next, about in-line with average growth since 2000 Interest rates will likely be low-for-long Investment plans contained in the provincial budget have been about $900 million lower, on average, versus actual institutional investment Manufacturing sales, capacity utilization and the industrial availability rate all trend together with industrial investment. All of these data sets are pointing to increased industrial investment Sales of retailers, the stock market, asset values of pension funds, and office vacancy rates can all give strong indications as to the direction of commercial investment. The unemployment rate in the services sector and residential construction can also provide clues

The meagre level of industrial permits issued in the first quarter obscures the picture of industrial activity in the

north. The mining sector is booming in the region, with major work on-going at various sites, including Detour Lake and Onaping Falls. The permit data does not capture the full value of this work. Our projects data indicates that the $2 billon Vale atmospheric emission reduction plant project kicked off in March.

After reaching a near-term peak in 2010, institutional permit issuance has trended downwards. This mirrors the expenditure pattern of the government’s stimulus program.

A mere $5 million dollars worth of commercial permits were issued in Northwestern Ontario in Q1 as commercial activity in the sub-region continues to unwind from a massive 2010.

Permit Values - January to March - 2012 NORTHERN ONTARIO

After a weak 2011, the first quarter brought a promising increase in industrial permit issuance, boosted by the

solar sector. Peering ahead, a $100 million dollar manufacturing plant in Prescott is on the books for this year.

The Ottawa region drove an increase in commercial permit issuance in Q1, thanks to office rehabilitation work. Prospects for commercial construc-tion are bright thanks to upcoming work at large shopping centres and construction of the new $150 million Lansdowne Live retail complex.

At $78 million, the level of institutional permits issued in the first quarter was on par with historical levels. On-going institutional construction includes activity at the Quinte consolidated courthouse and at Queensway-Carleton hospital. Looking ahead, work at the correctional centre in Bath and at the hospital in Hawkesbury will keep contractors and construction trades busy.

Permit Values - January to March - 2012 EASTERN ONTARIO

The GTA had its busiest first quarter in terms of industrial permit issuance in four years. The demand

for scarce warehouse space has stimulated construction of these building types.

The value of commercial building intentions was at its 2nd highest first quarter level in over 10 years. The increase in commercial permit issu-ance is consistent with declining office vacancy rates in the region. Major projects under construction include the 933,000 square foot RBC Water-park Place and the First Meadowvale Corporate Centre in Mississauga.

After a record 2011, some decline in institutional permit issuance was anticipated. However, the level of institutional permit issuance in the first quarter was still above-average, indicating that the level of construction will still remain strong. In the first quarter, construction of the new $1.75 billion Humber River Regional Hospital began.

Permit Values - January to March - 2012 GTA ONTARIO

Source: StatsCan

Sector Value (in 000s) % Change

Industrial $2,933 -91.7%

Commercial $19,356 -51.1%

Institutional $12,764 -69.0%

Total ICI $35,053 -69.8%

Source: StatsCan


Industrial $39,883 113.0%

Commercial $268,730 73.6%


Total ICI $386,636 48.8%

Source: StatsCan


Industrial $185,073 94.4%



Total ICI $1,583,323 -11.4%

ONTARIO REGIONAL PERMITS UPDATE

JULY 2012 9

Source: Reed Construction Data, Industrial Info Resources

PROJECT CITY VALUE Humber River Regional Hospital Toronto $1,750M Detour Lake Gold Mine Restart and Mill Addition Cochrane $1,450M Erieau Windfarm Blenheim $305M Durham York Waste-to-Energy Centre Newcastle $250M Ashbridges Bay Maintenance and Storage Facility Toronto $238M Go Transit Weston Tunnel Grade Separation, Phase 3 York Region $189M Port Hope Solid Waste Management Facility Clarington $150M Fraser Morgan Nickel/Copper Mine Onaping Falls $119M Burlington Skyway Wastewater Treatment Plant Burlington $107M Ivaco Rolling Mills Steel Mill Expansion L’Orignal $80M

Industrial permit issuance increased in Hamilton-Niagara and Muskoka-Kawartha, both reaching their highest level since 2008. However, a sharp decline in Kitchener-Waterloo dampened industrial intentions for the Central region. Looking ahead, construction of the new Maple Leaf Foods plant in Hamilton will begin this summer.

Commercial permit issuance increased in Hamilton-Niagara and Muskoka-Kawartha. In Hamilton-Niagara, the Q1 value was its highest in 10 years, consistent with strong employment growth. Permit values were lower in Kitchener-Waterloo, in-line with upward trending vacancy rates.

Institutional activity is currently being powered by the St Joseph’s Healthcare project in Hamilton. Going forward, stakeholders are excited about the new Oakville hospital, Guelph courthouse and new educational facility at Wilfred-Laurier University.

Permit Values - January to March - 2012

The industrial sector is only making modest progress in its recovery from the recession. First quarter permit issuance was down in both Windsor-Sarnia and London, though it was higher in Stratford-Bruce.

Despite relatively weak economic conditions, commercial permit issuance was higher in Q1 versus the same period a year-ago, driven by the London region. The long-term trend for commercial construction is positive, as a softening commercial market in Windsor has been offset by growth in London.

Despite declining year-over-year in the first quarter, institutional permit issuance was at its third highest Q1 level in over 10 years. In Windsor-Sarnia, permit issuance soared thanks to the South-West Detention Centre. There is a high degree of optimism about institutional construction among OCS stakeholders.

SOUTHWESTERN ONTARIO

CENTRAL ONTARIO

Permit Values - January to March - 2012

Source: StatsCan


Industrial $48,180 -2.7%



Total ICI $244,750 5.4%

Source: StatsCan


Industrial $110,649 -49.6%



Total ICI $514,902 -27.3%

TOP CONSTRUCTION PROJECTS STARTED - JANUARY TO MARCH 2012

ONTARIO REGIONAL PERMITS UPDATE

10 JULY 2012

www.iciconstruction.com

UPCOMING EVENTS FOR MORE INFORMATION AND OTHER UPCOMING CONFERENCES & INDUSTY EVENTS: www.iciconstruction.com

OCS 2012 EVENT CALENDAR

Ottawa Convention Centre Ottawa, Ontario Come visit the OCS display booth!

Sudbury Holiday Inn Sudbury, Ontario BY INVITATION ONLY

AUG 19-20 AMO ANNUAL CONFERENCE

SEPT 17-18 ANNUAL GENERAL MEETING

FOR MORE INFO ON THESE EVENTS EMAIL US AT: [email protected]

STAFF DIRECTORY

ww

w.icic

on

stru

ctio

n.c

om

Sean W. Strickland Chief Executive Officer

[email protected]

Katherine Jacobs Director of Research & Analysis

[email protected]

James Wright Project & Communications Coordinator [email protected]

Ryan Isojima

Graphic Design & Web Support [email protected]

Gianluca Cipriani

Office Administrator [email protected]

Rishi Sondhi

Construction Information Coordinator [email protected]

Stew Stevenson

Owner Outreach & Tripartite Coordinator [email protected]

ONTARIO CONSTRUCTION SECRETARIAT

MARK THESE IMPORTANT DATES IN YOUR CALENDAR FOR 2012

940 The East Mall, Suite 120, Etobicoke, ON, M9B 6J7 T 416.620.5210 I F 416.620.5310 I TOLL FREE 1.888.878.8868 QUESTIONS/INQUIRIES, PLEASE EMAIL: [email protected]

EYE ON ICI N E W S L E T T E R

Ontario Construct ion Secretariat

Z For any enquiries related to the eye on ICI newsletter or to inquire about content submissions please contact Rishi Sondhi at: [email protected]

CONex is an OCS affiliated website

2012 ocs state of the industry and outlook conference...

Documents