Statistics Canada published its annual roundup of investment intentions at the end of February, and the forecast calls for public and private entities to spend $32.2 billion on capital projects in B.C. in 2018.
The increase is slight versus the 21% increase logged in 2017, but the construction and development sectors take centre stage in 2018 with some of the biggest increases.
While capital expenses in the construction sector are set to remain stable at $884 million, up marginally from 2017, the biggest gains with respect to development activity will be in utilities as well as the real estate and rental and leasing sectors. Both sectors are anticipated to see double-digit gains in investment, of 14.2% and 13.6%, respectively. Capital investment by utilities will increase to $4.5 billion, while companies active in real estate and rental and leasing activities will make capital investments in 2018 totalling $1.6 billion.
Utilities will primarily spend more on machinery, increasing investment 62.7% to $423.5 million, while real estate and rental and leasing companies will focus on construction with a 55.4% increase to $552.3 million. Utilities, by contrast, will boost spending on construction by just 10.8%. (The careful observer will note that the biggest gains come off the smallest component of spending in each sector.)
Statistics Canada’s estimates focus exclusively on non-residential capital expenditures.
Investment in action
The latest data from the BC Major Projects Inventory highlights the steady nature of investment activity. Regular updates to the inventory were interrupted last year by the provincial election and its aftermath, but the latest figures hold good news.
The number of projects classified as “on hold” in the province fell from 80 to 66 in the third quarter of 2017, while the number of projects under construction rose from 347 to 355 – the highest level since December 2015. The value of projects under construction rose to $74.7 billion. Victoria’s $2 billion waste-water management project, development of the Lower Lynn Interchange in North Vancouver and the Centre for Mental Health and Addiction in Coquitlam were among the projects that saw construction begin in the third quarter of 2017.
Proposed projects new to the inventory during the quarter include the $400 million Second Narrows water supply tunnel in Vancouver, $245 million worth of highway improvements in Delta and the third phase of the Lions Gate Hospital redevelopment project in North Vancouver.
All that investment, in both major projects and minor, is good news for the B.C. economy, as revealed by a new study undertaken by Meyers Norris Penny LLP (MNP LLP) for the Urban Development Institute, BC Real Estate Association and Greater Vancouver Home Builders’ Association.
Based on 2016 data, the study estimates the total economic impact of the development industry in B.C. at $46.4 billion in both direct spending and indirect effects. The study estimates the direct economic benefits at $27.3 billion, with a further $19.1 billion attributed to indirect and induced spending. The indirect and induced spending includes spending by suppliers to the development sector as well as “the additional spending by the employees of suppliers (primary suppliers) and their suppliers’ suppliers (secondary suppliers)” as a result of development activities.
The overall economic impact is up 32.4% from the previous study published in 2013, which looked at the development industry in 2012.
When the spending is expressed in terms of contributions to the gross domestic product, however, the numbers are smaller even though the increase is similar. The industry contributed $22.9 billion to the province’s gross domestic product in 2016, up 34.6% from $17 billion in 2012. Given a B.C. GDP of $263.7 billion in 2016, the development sector represents about 8.9% of the provincial economy.
The sector also became more productive, given that employment attributable to development activities increased a mere 5.4% between 2012 and 2016, from 221,544 to 233,613 full-time equivalent positions. •