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During periods of economic turbulence, it’s better to be well prepared. Many challenges lie ahead for businesses in the construction sector.
Given the climate of economic uncertainty caused by both current and potential changes in U.S. and Canadian trade policies, forecasting can be difficult. As a result, companies must demonstrate flexibility and make preparations based on potential fluctuations.
To do this, you should have an understanding of the sector’s present state and the possible impacts of U.S. measures. They are essentially the foundations on which governments and organizations must act.
What are the potential impacts of a trade conflict with the U.S.?
Higher costs and supply chain disruptions
Tariffs could disrupt supply chains and make purchasing materials such as wood and steel more difficult and costly.
Project delays
Unforeseen costs and supply chain disruptions could lead to delays in the completion of construction projects.
Tighter profit margins
Construction companies will need to absorb a portion of the additional costs, which will reduce their profit margins.
Higher prices for consumers
The increasing costs of materials will be passed on to consumers, which will increase the price of construction projects.
Reduced investment
A combination of economic uncertainty and higher costs will lead to reduced investment in new projects.
According to a study by the Canadian Federation of Independent Businesses (CFIB), 54% of SMEs in Canada did not feel ready to assume the potential impacts of U.S. and Canadian tariffs and:
- 24% were considering delaying or cancelling their expansion projects;
- 20% were considering reducing their workforce;
- 45% were seeking new suppliers to cope with the tariff situation;
- 62% were considering passing on the additional costs to their clients at different levels in the event of the imposition of U.S. and Canadian tariffs.
These changes are in addition to the challenges that construction sector companies are already dealing with.
What is the current situation of the various construction sector segments?
While the shortage of qualified employees is less pronounced than in previous years, the labour shortage and decreased productivity are still major challenges. Managing finances and the risks associated with contracts are also some of the desired improvements among entrepreneurs.
Residential
A modest recovery in housing starts was observed in 2024. Interest rate cuts allowed entrepreneurs and developers to obtain financing and profitability was back on the table. Lower interest rates also made property ownership more accessible for individuals.
However, tariffs imposed by the U.S. and the renewal of collective agreements in spring 2025 will increase the cost of both labour and materials.
The timeframe required for obtaining building permits was another irritant raised by entrepreneurs.
However, the need for housing also has an impact. A total of 1.2 million homes must be built by 2030 to restore housing affordability. According to the Canada Mortgage and Housing Corporation (CMHC), this represents 860,000 more homes than anticipated in Québec.
Commercial and institutional
The commercial and institutional sectors have reported:
- a shortage of financing;
- institutional projects hindered by reduced spending.
Several projects in the school and health sectors are expected, but the amounts allocated by the Québec government to offset maintenance deficits were reduced by $400 million. However, the current context of a trade conflict could be a game-changer.
Infrastructure and engineering
With regard to infrastructure, various projects (bridges, roads, public transit, etc.) are planned in Québec and elsewhere.
- A total of $320 billion has been set aside for major projects to decarbonize Québec’s economy (batteries, mines, electricity) by 2035. (See the 2024-2034 Québec Infrastructure Plan).
- Several energy projects (wind and solar power farms, electric power lines, etc.) have also been planned.
With the introduction of Bill 62, the Québec government aims to take a collaborative approach to infrastructure projects and enhance risk sharing. The desired objective is to complete projects 20% to 25% faster while paying 15% to 20% less.
It should be noted that the current context of a trade conflict with the U.S. has pushed the Québec government to accelerate certain projects. More specific announcements are expected.
Industrial
The industrial sector is the strongest sector. This is primarily due to the impact of the battery industry and data centres.
It should be noted that there has been a significant increase in available premises in Montréal over the past year, but a shortage of locations under 30,000 square feet.
What are the construction sector’s priority needs?
Management coaching
The majority of SMEs in Québec fear missing out on business opportunities through either a lack of business development expertise, exposure to the call for tenders process or a shortage of skilled workers.
They would benefit from the support of teams of experts specialized in this field.
In recent years, there has been a shift towards a collaborative approach to project delivery. This management methodology, which is supported by Bills 79 and 62, involves ongoing discussions with the bidders from the project design stage and throughout the process.
Cash management and financial advice
Bidders must be able to rely on suppliers that offer solutions at competitive prices and within a short timeline.
Financial management and calculating production costs to secure favourable contracts have become important factors in ensuring business continuity. Among other things, this involves offsetting cost overrun and potential delays caused by the current context (supply issues and a labour shortage).
Digital transformation and innovation
According to the most recent Leger surveys, the sector is experiencing low productivity and a lack of innovation.
- A total of 45% of Québec businesses had a low digital maturity level in 2023 (compared to 33% with an average level and 16% with a high level).
- Only 12% had conducted a digital audit during the previous two years.
Environmental, Social and Governance (ESG) criteria
There is a clear trend towards sustainable construction. Both clients and financiers seek projects with a strong focus on environmental and social factors. Below are elements that should be monitored in particular.
- Decarbonizing buildings following the recent adoption of the Act respecting the environmental performance of buildings;
- Reducing the carbon footprint of construction projects;
- Higher energy efficiency and carbon footprint standards;
- The creation of a public registry of the environmental performance of buildings;
- Advances in ESG certifications and factors in real estate (major property owners must respect ESG standards and can be held accountable by their shareholders);
- GHG emission disclosures (obligatory in Montréal for large commercial and residential buildings, i.e., those with 25 or more dwellings).
Entrepreneurial succession
As is the case in several other sectors, entrepreneurs are seeking successors to take over their businesses. Indeed, there has been a 5.5% increase per year in the number of construction company transfers in Québec. A total of 11% of companies in this sector are transferred businesses.
Cybersecurity
According to data gathered in 2024, 13% of construction companies in Canada had experienced at least one cybersecurity incident in 2023. Artificial intelligence has led to an increase in this type of data security threat. During the same year, 50% of Canadian SMEs in the construction sector are believed to have been victims of fraud.
Recruitment
There are approximately 45,000 vacant positions across the country. This includes, for example, entry-level labourer roles, specialized trades and project management positions.
In order to address the labour shortage, 16,000 individuals must be hired every year until 2027 in the construction sector in Québec.
It should also be noted that one in five workers in the sector plans to retire in the next decade.
If organizations have no control over the external environment outside their sector, they can still take action based on the various factors explored in this article.
As an entrepreneur, you must guide your company’s future, but you don’t have to take on the challenges alone. You can call on a team of experts who can help you achieve your goals and support you every step of the way.