Building permits down in Edmonton region thanks to drop in industrial plans

After three quarters of gains, construction intentions in the Edmonton area were down in the second quarter of 2017.

Overall, builders in the Capital Region took out permits worth just under $1.2 billion, representing a 16 per cent decline from the Q1 numbers ($1.4 billion in permit values).

READ MORE: Edmonton housing sales rise despite gloomy economic outlook 

The drop is being attributed to the sharp decrease of industrial permits, which are down by 36 per cent.

“We saw a very sharp pull back in terms of industrial permits in the second quarter and that would suggest, on the non-residential side, we could potentially see some weakness,” Edmonton’s Chief Economist John Rose said.

Tweet This Click to share quote on Twitter: "We saw a very sharp pull back in terms of industrial permits in the second quarter and that would suggest, on the non-residential side, we could potentially see some weakness," Edmonton's Chief Economist John Rose said.

“That implies that going forward, because builders are requesting permits, that means housing-related construction activity should hold up reasonably well.”

READ MORE: Edmonton job market recovery hits bump in July 

However, this year’s second quarter compared to last year’s second quarter saw building permit values up by five per cent, due largely to higher numbers for residential permits. They were up by 27 per cent over last year.

“Certainly, from the housing construction side, it’s good news,” Rose said. “Solid numbers.”

Tweet This Click to share quote on Twitter: "Certainly, from the housing construction side, it's good news," Rose said. "Solid numbers."

“But a note of caution with respect to non-residential construction going forward: If we don’t see a turn around in those permit numbers by the time we get into mid-2018, you could see some weakness in that area.

“While you do get cyclical ups and downs in the housing market obviously, you can see very, very dramatic shifts in non-residential construction and particularly industrial — and to a lesser extent, commercial — where you can have a couple of very large projects hit and that drives the market for a while and then it comes down quite sharply,” Rose explained.

Province-wide, overall construction intentions were down by five per cent on a quarterly basis and by one per cent on an annual basis.

Canada-wide, the total value of residential and non-residential building permits issued by municipalities was up by four per cent on a quarterly basis and by 10 per cent on an annual basis.

Housing starts were up slightly in July, according to the Canada Mortgage and Housing Corporation. There were 217,550 new starts last month compared to 215,175 in June.

READ MORE: City economist to downgrade Edmonton forecast because of wildfires 

“In July, Canada’s pace in housing construction ramped up for a seventh consecutive month,” CMHC’s chief economist Bob Dugan said.

“British Columbia and Alberta were the main contributors to the higher trend in housing starts.

Tweet This Click to share quote on Twitter: "British Columbia and Alberta were the main contributors to the higher trend in housing starts.

“While B.C.’s construction coincides with near-record low completed and unsold units in the past few months, Alberta’s inventory of new unsold homes is ramping up, highlighting the need for managing inventories.”

READ MORE: Nearly one-third of Calgary’s office space could be empty by 2018, real estate firm says 

In Calgary, the trend in new home construction this year has increased, moving closer to historical averages. CMHC said, despite inventories sitting at near record highs, multiple starts in recent months have been strong.

“If the current pace of production does not ease, there is the possibility that inventories will stay elevated for an extended period of time,” CMHC said in a news release Wednesday.

— With files from Scott Johnston, 630 CHED