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March 23, 2020 - Blog Article
Construction Cost of CRE in Canada

There are many factors that have to be analyzed and included in the construction planning process. The process requires insight into the market performance, timing of the project, and of course labor and material costs. 

That fact is more true than it has ever been before. The current concerns regarding the rising cost of construction, the potential limited supplies due to global coronavirus cases, and unknown demand are all factors that will impact Canadian CRE. It seems prudent to be cautious with your investments, but having a good advisor on your team, like ReDev Properties, will help you make the best strategic choices.  

Annual Construction Cost Guide

The Altus Group puts out an annual Construction Cost Guide that helps analyze the aforementioned factors. Their guide provides a forecast of construction hard costs across all commercial real estate asset classes in the Canadian marketplace. 

Altus does this by utilizing data points from historical project costs. This data from the previous year costs are stored in their proprietary database, and then analyzed. To ensure transparency they use data from over 1,300 engagements to facilitate benchmarking supported by intelligence from their own in-house surveyors, economists, and market trend experts. 

The Rising Costs of Construction in Canada 

Last year was quite a success in the construction industry in Canada. Municipalities had issued over $102.4 billion in permits, which was a 2.6% increase from 2018. 

Although the residential sector is the strongest across provinces, around $40.4 billion worth of permits were for the non-residential sector with retail and office constructions accounting for over half of this amount. 

This isn’t surprising considering that Canada became quite a haven for both domestic and global investors, both encouraged by the positive immigration policies and major macroeconomic tailwinds. 

The biggest issue investors are currently facing is the rising price of commercial real estate construction in Western Canada. In Vancouver, Alberta, you can expect to pay between $190 and $240 per square foot for the construction of a supermarket. Just a year prior, the top price was $220. The same holds true for strip plaza construction and big box store construction at $185/sf and $240/sf, respectively, versus the year before was $155/sf and $220/sf. 

The Bottom Line 

The financial plan for your development or infrastructure investment is affected by global and local economic conditions, market trends, and advances in building materials, practices, and approaches. 

Each day somewhere in the world there are external factors that can affect investment decisions; however, investing in new CRE like retail or mixed-use can prove to be the diversity you need to help stabilize your portfolio. Contact ReDev today to learn about how to sure up your investments.