CONSTRUCTION MARKET OVERVIEW
Public workloads pick up the slack
Canada’s construction sector weakened in Q1 2026, with industry GDP declining by 1.3% on the quarter – its second drop in a row. This contraction was led by a 4.2% fall in engineering construction, reflecting a pullback in investment in engineering structures and broader capital-intensive projects. This is consistent with a wider slowdown in business investment, which has been trending downward amid trade tensions and lower private-sector confidence.
Residential construction also edged lower (-0.4%), marking its third consecutive quarterly decline, while non-residential (+1.5%) and repair (+0.1%) posted modest gains, highlighting an increasingly uneven profile across the industry.
Source: Statistics Canada
Investment in Building Construction (IBC) data mirrors GDP trends, with overall investment declining by 1.5% in Q1 2026. Residential contracted by 2.9% over the same period while non-residential increased by 1.7%, highlighting further divergence at a public and private level.
Public and policy-led investment is increasingly sustaining construction activity, particularly as governments advance education, healthcare and other infrastructure spending priorities to support economic stability. In contrast, residential segments remain more exposed to private financing conditions, cost pressures and investor confidence.
Source: Statistics Canada
This is increasingly evident when looking at individual asset classes within the IBC data. Both single-dwelling (-1.7%) and multi-dwelling (-3.8%) residential construction fell, highlighting a challenging private development environment and rising unsold inventory across major markets, dampening confidence and delaying new projects. As a result, housing starts dropped by 5.3% on the quarter in Q1 2026 and are expected to weaken throughout 2026.
Commercial construction supported non-residential’s growth the most, rising by 2.5% on the quarter in Q1 2026. Strength in the commercial segment has been underpinned by return to office mandates and data centre development, as the demand for digital infrastructure and cloud capacity increases.
Institutional workloads remain resolute, increasing by 1.9% on the quarter, reflecting ongoing momentum in publicly funded projects, particularly in healthcare, education and broader infrastructure programmes. Industrial activity, however, decreased by 0.6% as the asset class continues to normalise following a period of elevated investment.
Looking ahead, this variance between residential and non-residential construction is expected to persist, especially in the near-term. Publicly backed projects will continue to provide a floor for overall activity, while any meaningful rebound in residential construction will likely be contingent on broader macroeconomic stabilization.
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