Home Month and Year March 2017 To Build or Not to Build? That is the Question.

To Build or Not to Build? That is the Question.

The health of Alberta’s construction and renovation industry

Undrcard Boxing Studio on 10th Avenue SW. Photo courtesy of Ryan Murphy. Construction

Alberta’s economy has been hit hard – many who suffered job loss have been forced to sell their home(s), and consequently, some have also felt the need to renovate in order to maximize the selling price. In some cases, renovation or new build projects have been halted altogether and certain commercial projects have been slowed as well.

But many industry leaders see a bright future ahead for Alberta’s economy and, in turn, for its construction and renovation industry. Calgary, in particular, has seen several commercial projects take flight despite the economic downturn. Our city, full of fitness and sports enthusiasts, has welcomed several new fitness facilities to cater to almost every kind of workout, from spinning to yoga to rowing to boxing – the list goes on and on.

One construction company in particular has been busy and involved with some of the city’s most popular workout joints. Ryan Murphy Construction Inc. is responsible for building commercial space for companies such as Junction 9 Yoga & Pilates in Inglewood, and most recently Undrcard Boxing located on 10th Avenue SW.

Lara Murphy (of Ryan Murphy Construction) says, “The most prevalent effect we have noticed is a delay in lead times for projects getting up and running.” She also believes the slow in the economy has caused an “apprehension in spending.” Add that to the surplus of spaces available for lease in Calgary and the result is prolonged negotiations. Murphy goes on to say securing financing for some clients is also proving to be very difficult. “That said, we have recently noticed an upward trend in new projects coming to tender and hope this is a lead indicator of things improving in 2017 – the new normal may have arrived,” Murphy says with confidence.

The residential construction industry has also seen some positive growth within the recession period. Matthew Neufeld, owner of Braemyn Homes, says that although his company, along with many others, has seen the negative effects of the recession, he believes that with the negative comes the necessity to work hard during tough times, something that is “truly the beauty within our industry.”

He states transparency is key to retaining and maintaining valued contacts. When Alberta’s economy is thriving, many builders and renovators, according to Neufeld, will inflate their profits based on demand keeping their honest budgets behind “closed doors.” Braemyn Homes has never done so and “provides researched, itemized costs on a client’s project for their review. This creates a trustworthy relationship between the builder and client – necessary in an uncertain market,” advises Neufeld.

Despite the slowed economy, Neufeld says projects are still a go, but many potential customers are making decisions with a greater consideration to budget, quality, detail and transparency. Braemyn Homes is proud to have seen positive growth during the economic downturn and Neufeld believes this is recognized by their core values of being “honest and fair all while working hard to ensure an exceptional product.”

“Challenges ahead for 2017 definitely relate to late 2016 mortgage rule changes – November 1st National Energy Code 9.36 implementation, gypsum board tariffs, expected carbon tax cost increases and U.S. exchange rates,” says Peter Skolaude, local real estate agent and area sales manager for Calbridge Homes Ltd. He maintains that although challenging, builders are poised to deal with these changes with the goal of providing maximum value to consumers.

Skolaude explains that when it comes to new construction in the single-family residential sector, builders have a unique insight due to the timelines involved with selling this type of product. He provides the example of when the market started to cool in 2014. “We slowed down sooner than the resale market because our clients are looking at making a purchase that will take much longer to close (8-12 months versus 60-90 days). This definitely makes us a leading indicator of consumer attitude and potential market direction as confidence to buy or upgrade a home is probably one of the biggest commitments a person will make in their lifetime.”

He is also confident and encouraged by conversations with Calgarians and potential relocation prospects looking to upgrade. As the job market stabilizes, Skolaude believes everyone will take notice that Calgary’s housing affordability is at a historic low (RBC). “Calgary is a great deal!”

Skolaude adds that because companies had the 2008 financial crisis fresh in their memories, most builders were not sitting on a large inventory of spec product when the market started to slow in 2014. He says many were able to react quickly to reduce inventory, costing and overhead. “So given that history, we came into 2016 very lean and with conservative expectations and great value in product.”

According to the City of Calgary’s planning and development department, 5,139 development permits were approved in 2016. Further to those statistics, 14,941 building permits, 60,156 trade permits and 38,722 business licences were issued.

Kevin Griffiths, director of Calgary Building Services with the City of Calgary’s planning and development department, confirmed Calgary’s construction values reached $4.7 billion in 2016, demonstrating that despite the current economy many developers remain confident in investing in our city.

“A number of significant projects were submitted to the City of Calgary in 2016. While not a guarantee they will move to completion, it is a strong indicator construction work will begin or continue into 2017 and 2018. A few examples of these multimillion-dollar projects include the Arris Towers valued at $131 million (553 Riverfront Ave SE); the Orchard valued at $57 million (12 Ave SE); and Crosstown Towers valued at $78 million (25 Ave SW).”

He goes on to say while Calgary’s construction values last year ($4.7 billion) were below Calgary’s record-breaking years of 2014 and 2015, they remain on par with its 10-year average, and well above the 2010 value of $2.9 billion. “Overall, the number of permits issued fell marginally, less than four per cent overall. Home renovation projects in 2016 remained consistent with activity in 2015.”

It is also important to note the relationship builders have with the city is crucial to meeting project deadlines and making important construction decisions. Griffiths explains the city is working closely with industry to better serve our city and enable development that meets the needs of Calgarians.

“The city has worked with industry to develop a work plan which identifies opportunities for capital investment that could bring economic stimulus for Calgary. As part of this work, for example, the city improved how we process a number of development permit application types from previous years, which has made it faster for developers to obtain decisions on their applications. This enhancement will help developers move more quickly to building permits, and eventually construction.”

So what does the future of construction and renovation look like for Calgary? “All builders are expecting challenges and disruptions but to what extent we are unsure,” says Skolaude. “I do think we are poised to continue to provide excellent value to consumers and that consumers are definitely starting to notice with increasing confidence.” Murphy echoes these sentiments and adds, “In construction any given company has a Rolodex of potential and recurring clients that are always evolving. Predicting how these unfold, I’ve learned, is next to impossible. We work them all!”

There is no doubt we will see a correction in our economy, and when we do, Alberta’s construction and renovation industry will be ready and waiting.