Growth to return as economic conditions improve

Construction activity is expected to remain supported through 2026, led by institutional and engineering investment, while residential and industrial markets continue to face headwinds. Conditions should improve in 2027 and further in 2028 as economic growth strengthens and confidence returns, supporting broader-based activity across both the public and private sectors.

Housing demand continues to be constrained by elevated price-to-income ratios, labour market uncertainty and slower population growth, all of which are weighing on new project viability, demand for new housing and buyer confidence. These factors are reflected in the expectations of major financial institutions, which forecast housing starts to fall, on average, by 6.2% in 2026 and a further 8.8% in 2027.

In the residential space, multiple-dwelling construction should remain more resilient compared to single-family, supported by continued demand for more affordable housing formats and ongoing public policy efforts aimed at improving housing supply.

Institutional construction is expected to remain strong through 2026 and into 2027, supported by continued investment in healthcare, education and other public infrastructure. Activity levels remain elevated across multiple regions, with healthcare projects particularly active in Ontario, Alberta, Quebec and Atlantic Canada, while major education-related projects continue to support workloads across the country. Forward-looking indicators suggest this trend is likely to persist. The value of institutional and governmental building permits increased by 41.0% on the quarter in Q2 2026, accounting for a sizable share of all non-residential commitments for the period.

Commercial activity should remain supported through 2026 by expanding return-to-office mandates across public administration and major financial institutions. Continued investment in retail banking networks, leisure-oriented developments and the repositioning of existing commercial assets should provide additional support to workloads. Yet the sector remains deeply connected to overall economic activity and its outlook, with looming tariff disputes complicating the picture.

The industrial sector is expected to face another subdued year through the remainder of 2026 as trade uncertainty and cautious business investment continue to weigh on activity. Elevated industrial availability rates and a large amount of unleased space within both newly completed and under-construction projects are likely to limit new development activity until fundamentals improve and occupier demand strengthens.

Repair activity is set to remain stable despite limited housing turnover, as essential repairs, renovations and maintenance support workloads across both the private and public sectors. Canada's aging housing stock and rising investment in apartment and multi-unit renovations should continue to support demand, helping offset the effects of cost pressures and broader economic uncertainty.

Engineering construction should remain one of the better-performing segments through 2026 and into 2027, supported by a substantial pipeline of transportation, utility and water infrastructure projects across several provinces. Continued investment in infrastructure, energy and major capital programs should reinforce workloads over the medium term. While delivery capacity and project execution remain key considerations, industry outlooks continue to point to growth above long-run historical trends.