With lending rates on their way down, paired with a need for additional housing stock and more infrastructure, expectations are for growth in Canada’s construction sector in 2025. The question remains where and when, especially in light of ongoing challenges like the steady rise in material and labour costs, and finding enough workers with skills that align to job openings. Technology may help alleviate some of the pain points, however, and 2025 could be the year where Artificial Intelligence (AI) takes a key role.
“Most projections I’ve seen suggest that we’re going to go through a period of relatively slow economic growth,” stated Keith Reading, senior director of research at Morguard. “Growth is good.”
He, like many who were surveyed for their insights going into next year, expect the two biggest hurdles for the industry to be finding enough skilled labour and navigating rising costs.
“A real driver in terms of economics and costs is the availability of labour and the productivity of that labour,” explained Derron Bain, chief executive officer at Concert Infrastructure. Given the number of workers closing in on retirement, his company is putting a significant amount of support into training programs aimed at building tomorrow’s workforce.
In the more immediate term, Reading says the industry needs to keep filling the labour funnel via immigration but acknowledges that the system is not without its flaws. “We, as a country, need to refine that process and make sure that we’re bringing in the right workers from other countries to fill the void,” he stated.
And the void is real.
“If we don’t have the people, and they don’t have the proper skillset, projects will have to wait until the labour shortages are closed,” explained Chris Atchison, president of the British Columbia Construction Association, who says the labour crunch is on in his province. “This often means waiting for other projects to finish before the labour pool can move on to other projects.”
A greater reliance on technology is helping some companies bridge that labour gap.
“The adoption and the practical use of it is really making a huge stride forward, and that’ll lead to boosts in productivity, less rework, more streamlined project execution,” said Kris Lengieza, global technology evangelist at Procore. “When trying to address labour, we have to think about the automation of work… automating the dull, the dirty and the dangerous.”
It’s a sentiment shared by Scott Crozier, vice-president, civil construction at Trimble. “We expect that technology providers will continue innovating with the goal of helping offset these challenges,” he said.
“My favourite example of this is a layout robot that helps you lay out information on a slab for the trades to come behind and do the work,” said Lengieza. “That person is still doing that job; they’re just using a different tool to do it. It’s like going from a hammer to a nail gun.”
Labour shortages and safety issues are increasing readiness to invest in technology agreed Troy Steele, regional sales manager for Western Canada at Brokk, who explained, “Many of our customers have started to shift their mindset toward robotics and automation.”
The biggest focus on the tech front will likely remain AI, however.
“Fifty-nine per cent of respondents of a recent Trimble survey said that artificial intelligence and machine learning will be one of the biggest trends in 2025,” stated Aviad Almagor, vice-president of tech innovation at Trimble. “It has, and will continue to, transform the construction industry due to the many efficiencies it brings.”
“AI is really good at parsing through a tremendously large amount of information and then distilling it down into something,” said Lengieza, who added that more focus will have to be put on collection of the data to maximize the technology.
“You cannot deploy AI unless you have the data first, that’s why everyone in the industry needs to have their path set out and be actively working on it if they want to drive AI in the technology stack,” advised Brandon Milner, senior vice-president and chief information officer at EllisDon. “If you do not have a digital strategy for the next two to three years, then the time is now to begin this.”
Digital strategies will likely be put to work on a number of significant infrastructure projects, a segment expected to remain a strong backbone for the industry this year.
“It’s pretty well documented that, from an infrastructure standpoint, Canada has some catching up to do, and some pretty significant projects. I don’t see any slowdown in that regard,” stated Reading. “We need more roads. We need better roads. We need more mass transit. The list goes on and on, and a lot of that is population growth driven.”
“Governments across Canada, whether federally or provincially, even into municipalities, are facing historic needs in terms of infrastructure requirements and infrastructure investment,” agreed Bain. “If you look at the state of some of Canada’s infrastructure, it’s not been properly maintained. It’s not been properly lifecycle renewed. It’s at the end of its useful life, and that requires investment and renewal.”
“We see this continuing into 2025, with public investments in everything from new metro lines and wastewater treatment expansions to road and bridge repairs,” agreed Brokk’s Steele.
The other major area of focus continues to be the housing crisis.
“Everybody knows that there’s not enough inventory. It needs to get built. I think a lot of people were on the sidelines waiting because interest rates and money was so expensive, we’re starting to see that relax a little bit,” stated Lengieza, who added that growth may not come until late in the year, and into 2026, however.
In the meantime, the desire to turn older, less-optimized properties, into housing developments appears to be gaining some traction.
“There is a growing interest in redeveloping shopping malls into mixed-use communities that integrate residential, commercial and retail spaces,” said Bill Ferreira, executive director at BuildForce Canada. “This approach aims to address aging retail infrastructure and urban housing demand, creating multi-functional spaces with greater density. Many malls, situated on sizable plots with established transit access, offer potential for urban intensification, which could increase housing supply in sought-after locations.”
“Over the past year, I think every owner of a shopping centre, particularly the larger ones, has looked at adding density to their sites, and often that’s residential towers… be it rental apartments or condominiums or the like,” added Reading. “Effectively, you’re building a mini village… you add a new market for your retail stores, and the value of the site typically goes up.”
“While shopping habits may have shifted in recent years, and this was likely exacerbated by the pandemic, shopping malls surrounded by housing will naturally see a boost in activity,” agreed Atchison. “We need to look at where there is usable space in our urban areas to build more multi-unit residential, and some shopping mall parking lots are underutilized, so they make for a great spot.”
Another market showing strong potential that is expected to continue in 2025 is the purpose-built rental sector.
“Demand for rental housing remains strong. In fact, we have seen impressive growth in apartment starts for the year to-date in 2024 across Atlantic Canada, and in Alberta and Quebec,” shared Ferreira. “Purpose-built rentals remain a promising area for future construction activity as market conditions stabilize and government incentives take further effect.”
Beyond housing and infrastructure, Lengieza is seeing growth in data centre construction. “When you think about the amount of data centre equipment we have to bring online to support the AI revolution that’s happening around us, these big data centre providers can’t build fast enough.”
The cost of projects, and housing, remains a significant factor in any potential growth, however. And while borrowing costs appear to be coming down, increases in activity may drive material prices higher.
“The reduction in interest rates offered some relief to developers and potential homeowners; however, growth in this segment was constrained by affordability challenges and ongoing tight labour markets,” stated Ferreira, who added that modest growth is expected for 2025.
“I think it will probably be in the spring of next year that we’ll start to see a real impact,” stated Reading. “Over recent history, rates are still relatively high, and depending on the project, you can’t always source financing that easily, particularly in the office sector.”
Waiting on interest rate relief may have some sitting on the sidelines, but that may not ultimately result in any savings on the final bill.
“When I’m speaking to governments and they complain about the cost of projects or budgets, the obvious answer is, ‘Yesterday was the cheapest day to build the project, not tomorrow,’” advised Bain. “That’s just the reality of the world we live in in terms of underlying inflation or cost of capital.”
