Home Month and Year May 2020 Commercial Construction in the New Normal

Commercial Construction in the New Normal

From the Calgary Cancer Centre to $30 million in paving

PCL’s massive Calgary Cancer Centre project.

The construction sector is an undisputed key driver of the Canadian economy. The related industries—residential, non-residential and engineering, repair and other construction services—employ millions of people, contribute more than $73 billion and account for approximately six percent of Canada’s GDP.

Despite various business broadsides—from the downturn, the toll of COVID-19, social distancing and employment—Calgary continues to be recognized as one of Canada’s largest and most influential markets for commercial, residential and infrastructure development.

Although some Alberta and Calgary economy speedbumps and some recent completions of major projects have impacted the dynamics of Calgary’s commercial and industrial construction, the sector is resilient, forward-thinking and gutsy.

“With such a significant backlog of work in the commercial sector that was happening in 2015, the industry appeared to lag the falling commodity prices more than normal, mostly because there was still so much momentum,” says Bill Black, president of the Calgary Construction Association, the professional association of more than 850-member companies throughout the Calgary region.

“Over the course of 2017 and 2018, as that work was completed, it became increasingly obvious that the backlog of opportunities was also reducing quickly. That was further borne out last year, as organizations began to see the direct impact of reduced workload and the looming realities of a prolonged period of lower volumes.”

Although Black is cautious and concerned about recent cycles in Calgary’s commercial and industrial construction sector, he acknowledges that several ongoing project and work readying to start may breathe much needed life into Calgary construction industry and provide the backlog that industry needs to make it solid for the next two or three years.

The many cranes, even the clusters of orange cones and the buzz of construction activity throughout the Calgary area are encouraging, very good signs.

The colossal $1.4 billion Calgary Cancer Centre is taking shape and on track for its scheduled 2023 opening. Condos, retail and office space, parks in the East Village and University District are bustling and growing. Several major residential and mixed use projects (like the 50-acre Greenwich Village near Olympic Park and others) are busy with construction. The $550 million new Event Centre (just north of the Saddledome in the Victoria Park neighbourhood), the $500 million expansion of Calgary’s BMO Centre (from 500k square feet to a space with more than one million square feet), and the first leg of Calgary’s $4.9 billion Green Line LRT project —-are readying for construction work starting next year.

As Bill Black points out, a fact and basic reality of commercial and institutional construction life is that, while the construction industry is a major employer with more than 41,000 firms across Alberta, there are relatively few high profile big companies doing projects. The stats prove that the average commercial construction firm is small, with 20 or less workers.

One aspect of commercial construction does differ throughout the country. In the Calgary area, like other major municipalities, the city is commercial and institutional construction’s biggest customer with infrastructure projects and expenditures like the ring road related work, Green Line work, overpasses, and kilometers of road widenings, paving, interchanges, overpasses, and more.

Infrastructure planning and investment continues to be a high priority for Calgarians, as shown in the 2019 Citizen Satisfaction Survey and it is a detailed masterplan of details, scheduling and a driver for economic recovery. “The City is using its resources to support the continued recovery and diversification of Calgary’s economy and build the foundation of a great future,” says Kerensa Swanson Fromherz, director of Transportation Infrastructure. “Our goals are to help create jobs and support new opportunities for investment, expansion, job growth and retention while delivering long-term value and affordability for Calgarians.”

This year is already a busy year with infrastructure construction. As Alberta Transportation continues the construction of the Southwest Calgary Ring Road and the West Calgary Ring Road, construction on two Ring Road integration projects will be completed by The City this year.

The City is doing a major Glenmore Trail widening and interchange upgrade, including, top-lift paving and landscaping. There is construction of two Airport Trail interchanges—at 19 Street N.E. and Barlow Trail—which the City explains will improve access for movement of goods, services and people to and from YYC.

Because it has been done in stages since 2017, Crowchild Trail upgrades—a major City infrastructure construction project—will be wrapping up by the end of this year. The $87 million project is adding lanes for drivers, rearranging off-ramps, and improving surrounding roads and pathways while more than 100,000 vehicles per day continue travelling along Crowchild Trail. “Keeping Calgarians moving along this major arterial road has been a priority because commuters, businesses and emergency services all rely on using this road 24/7,” says Jeff Baird, Senior Transportation Engineer.

Although commuters grumble about navigating around orange coned slowdowns and detours, traffic commotion is an occupational hazard of all infrastructure commotion and, despite the nuisance aspects, it is a good sign. And it is happening throughout Calgary.

“Paving projects—spelled out in the City’s Annual Pavement Rehabilitation Program—is more than $30 million of annual investment to maintain road and sidewalk infrastructure and employs both City and private contractors to complete the work. “Our life cycle paving program is less costly than full road reconstruction and allows Calgary’s roads and sidewalks to be improved, returning them to like-new condition,” explains Barry Poon, Calgary’s manager of Roads Construction.

According to PCL, one of the few, major commercial construction firms in Calgary and making the massive Calgary Cancer Centre project happen, “In the last five years, commercial construction activity has been down in the traditional commercial markets. PCL has diversified the resources and diversified the work we do to react to this change in the market. We are seeing more small to mid-size projects having much greater competition than normal, due to the changing construction industry in Alberta.

PCL adds that “Generally, we have two or three major commercial projects going at any one time. Additionally, we have numerous mid-sized commercial and infrastructure projects going in the last year.”

For the balance of 2020 and planning for some key projects in 2021, Bill Black cautions that Calgary’s commercial and industrial construction may have to re-tool for the Calgary economy new normal, the post COVID-19 new normal life and the Calgary business new normal.

“Recovery in this town traditionally means ‘next boom’” he says. “I think our vernacular needs to change for the foreseeable future. In a city conditioned by a cyclical boom and bust economy, the biggest adjustment has been coming to terms with the fact that we may not be returning to the next boom cycle and our traditional strategic habits may no longer apply.

“Learning how to compete in a saturated market which is still sized for higher volumes than what we are likely facing, is going to be a major adjustment for many. The market will likely have to right size and this may occur by attrition rather than choice. Ultimately we will have to consider the prospect of a more level marketplace with average growth year over year rather than the aggressive cycles from our past.

“This is a much less stressful market to live and work in,” Black adds. “But the adjustment required to function in such an economy, should it materialize after so many decades of reacting to the cycles, will be challenging.”