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Market Q1 Intelligence 2015 Report More people, more investment, more projects BTY.COM Contents 5 Overview 5 Escalation Summary 6 Regional Snapshots 6 Ontario 8 British Columbia 10 Alberta 12 Saskatchewan 14 Quebec 16 Manitoba 17 Atlantic Region 18 United States 20 Cost Data Parameters Comparison FEATURED STORIES 4 Canada: a continuing success story 5 More people, more investment, more projects 9 Taller wood buildings gain ground across Canada 11 Major mining prospects north (and south) of 60 13 Mobility is key for meeting labour demand 15 Making the most of modular construction 19 U.S. has potential to become world’s largest market for P3 projects 2 BTY Group Market Intelligence Report - Q1 2015 BTY.COM 3 Canada: a continuing success story OVERVIEW More people, more investment, more projects Joe Rekab Toby Mallinder Gord Smith Managing Partner Partner Partner WELCOMING 2015 WITH CONFIDENCE EXPORTING OUR EXPERTISE CELEBRATING P3 ACCOMPLISHMENTS A lower oil price notwithstanding, housing starts reflect the steady influx: 2015 Escalation the continuing flow of people to, and 189,000 units in 2014 and 189,500 in 2015. It’s an ill wind that blows no good – so goes Resurgent U.S. and overseas economies The continuing success of the Canadian investment in Canada will help keep Summary the old saying. The drop in the price of oil are also creating opportunity for the construction industry is due in no small workloads stable in 2015. Sustained Construction will remain strong in BC, may be painful for oil producing provinces, Canadian construction industry. Many of measure to the projects procured using investment in the energy sector in while activity levels settle back from Downward pressure is but it is blowing plenty of good across other Canada’s leading builders have taken on the P3/AFP models. And the Canadian P3 particular – hydro, oil and gas, and record levels of prior years in Alberta and coming from: sectors of the Canadian economy. Consider large Public Private Partnerships (P3) model’s reputation as best in class is well renewables – will combine with a steady Saskatchewan. The silver lining there is the growth drivers in this time of lower- infrastructure projects in the U.S. BTY grounded in the numbers. stream of immigrants that supports much lower cost escalation and easing • Forecast for continued modest cost oil, lower value Canadian dollar, and has been there to assist them (and U.S. residential demand to power steady growth labour demand for skilled trades. economic growth now even lower interest rates: builders) with our P3 advisory services. The value of projects that have reached in the construction industry. An estimated • Lower oil prices See more about the burgeoning U.S. P3 financial close exceeds $70 billion – and the $675 billion worth of projects – 75% of Bolstered by increasing demand from • Softer commodity prices (except • Intensive energy users such as market on page 19. models have a nearly impeccable record of them in the energy sector – are underway a strengthening U.S. economy, a lower lumber) that could cause a manufacturing, mining, agriculture, projects completed on-time and on-budget. or planned over the next decade. The lower loonie that favours manufacturing exports, decrease in materials costs and forestry are enjoying huge cost The growing U.S, market is also fertile Over the past decade The AFP/P3 model has oil price and legal and environmental continued infrastructure and other • Tighter restrictions on mortgage savings. ground for developing new markets for our delivered an estimated $9.9 billion in cost challenges may cause delays, but long- non-residential spending, and resilient • Demand for their output is rising as Cost Management and Project Monitoring savings for taxpayers over the traditional term, the tide is rising for oil and gas, residential sectors in their big cities, lending the U.S. economy continues to post services lines. In fact, we have opened two procurement method. That may help explain liquid natural gas, and hydroelectric as Ontario and Quebec will see accelerated impressive gains. new offices – in Los Angeles and Phoenix – why P3s are also becoming more popular well as renewable energy projects. About growth, as will Manitoba. Atlantic Canada Upward pressure on pricing • The lower Canadian dollar makes to serve the industry across the U.S. More across the U.S. See page 19 for more on half of the foreign direct investment in is again seeing record investment in is coming from: their exports more affordable – and on that on page 18. that. Canada – an estimated $343 billion in 2013 major projects, but the lower oil price Canada a more attractive place for – went to manufacturing, oil and gas and in Newfoundland and Labrador, and foreign investment. BTY has also been leveraging the Today, there are 220 P3/AFP projects mining. The lower loonie will only increase population losses elsewhere, sap the • A weakening Canadian dollar, international expertise, experience in operation, under construction, or in Canada’s appeal to foreign investors. vitality of overall construction activity. raising the cost of imported The lower cost of energy and borrowing and global networks of many of our procurement across Canada. The P3/ goods primes the pump for business to expand team members. And the reputation for AFP model has been used successfully for Continuing high levels of immigration The consensus view among major banks • Sustained spending on with capital investment in commercial and excellence that our firm enjoys. We’ve been transportation, transit, healthcare, justice, targeted at 285,000 in 2015 – and a total is that Canada’s GDP growth in 2015 will infrastructure industrial projects. Consumers (especially building new relationships with authorities, education, sports venues, and recreation of more than 2 million since 2006 – are be closer to 2.1% than earlier forecasts of • Continuing strong immigration car owners) have more to spend on goods agencies, and lenders in Europe, Asia, projects. also supporting Canada’s position as 2.5%. The Bank of Canada is expected to • Low interprovincial migration of and services, including homes. and Africa to provide services on projects a construction powerhouse. These continue to keep interest rates at or near skilled trades to meet regional in growing economies overseas. They, Ontario leads the way with more than 100 newcomers drive our 1.2% annual the historic lows of the past half-decade, demand We expect the construction industry to too, are discovering the benefits of P3 AFP projects. BC has more than 40 P3 population growth, almost double that of at least until the second half of 2015. The share in the good with lower costs for procurement. Many around the world now projects in procurement, under construction the U.S., and support robust residential lower rate serves to dampen inflation, transportation, easing demand for skilled regard the Canadian P3 model as best in or in operation. Alberta, Quebec and New construction, especially in the core of large which should also help to keep overall trades, and stronger competition (and class for innovation in delivering projects Brunswick have all used the model, and the urban centres as more and more people construction escalation low in 2015. weaker margins) among contractors. All of most cost effectively. government of Saskatchewan has mandated move downtown. The projections for stable these factors will help keep cost escalation that procurement be prioritized through P3 in check. These benefits strengthen our The potential for the construction industry where possible. ESCALATION FORECAST 2015 already positive outlook based on the we see in Canada is mirrored by perhaps Ontario 2%-4% strong construction pillars of immigration, even greater opportunity overseas – The performance of P3/AFP projects to British Columbia 1%-2% investment and infrastructure detailed in more good reason to welcome 2015 with date – and their prospects for even wider Alberta 0%-2% the Overview on the facing page. confidence. adoption and use – are part of the continuing Saskatchewan 0%-2% success story of Canada’s construction Manitoba 1%-2% The Canadian construction industry is industry. Quebec 1%-3% highly adaptable. It shifted smoothly to Atlantic Region 0%-2% public infrastructure after the financial crisis, then to private sector mega projects as growth drivers. We believe it will adapt again. It’s why we call the Canadian construction industry a continuing success story – and are welcoming 2015 with confidence. 4 BTY Group Market Intelligence Report - Q1 2015 BTY.COM 5 REGIONAL SNAPSHOTS ESCALATION SUMMARY 2014 : 1-2% 2015 : 2-4% 2016 : 2-4% Ontario Ontario set to surge with boost from lower loonie ntario will be the big winner with Big-ticket items include Eglinton Buttonville comprises 9 million to 10 Preliminary Construction lower priced oil, a lower dollar Crosstown Light Rail Transit, Spadina million square feet of mixed-use space, Investment Projection for 2015 and interest rates, and its location Subway Extension, and the Union Station while the West Don Lands will have 6,000 Oclose to major U.S. markets as the U.S. Revitalization. The Mayor of Toronto’s residential units. in $ billions Source: Buildforce economy revs up. Expect these factors vision for SmartTrack, a 53km surface 0 20 40 to work together to boost the province’s subway, 90% of which will be on existing Office projects such as 1 York, 100 Maintenance manufacturing and exports and make it GO Train tracks, will also be a significant Adelaide West, and the Bay Adelaide 10.6b Canada’s growth leader. investment within the GTA over the next East Tower are some of the more high few years. Other major transportation profile projects of the more than 5.9 “Ontario manufacturers and Residential/ Renovation Strong non-residential building projects include Ottawa Light Rail, million square feet of commercial space exporters can expect a bump from 37.2b and a still robust housing sector – Kitchener Waterloo Cambridge Rapid under construction in downtown Toronto.

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