Alberta non-residential construction costs way up

February 15, 2011

CALGARY, AB, Feb. 15, 2011/ Troy Media/ – Consumers may wince at higher gasoline and food prices lately. However, Alberta shoppers are not the only ones facing inflation. Just ask office and industrial building developers in Alberta’s major cities.

Compared to 2002, Edmonton’s non-residential construction costs in the fourth quarter of 2010 were up 57 per cent (i.e., index of 157.0, with 2002=100). Calgary’s costs were 60.4 per cent higher. In contrast, general consumer prices are up only 22.9 per cent over their 2002 level.

The Non-residential Building Construction Price Index (NRBCPI) is a quarterly series that tracks changes in contractors’ selling prices of commercial, industrial and institutional building construction. The index includes the cost of both general and trade contractors’ work (but excludes the cost of land, land assembly, design, development, and real estate fees).

The graph shows the dramatic run-up in non-residential construction costs during the boom years. A distinct peak was hit in the summer of 2008 when Calgary’s index was nearly double the 2002 level. However, costs fell quickly during the recession.

Since the trough in 2009, construction prices have levelled off in Calgary and moved a bit higher in Edmonton. But there are already suggestions that office vacancy rates in Calgary will not rise as high as was feared, and that new office projects may actually be announced sooner rather than later. That could start pushing the NRBCPI higher once again.

| Todd Hirsch, ATB Financial