Canadian Nonresidential Construction Starts Slow in 2026 Amid Economic Challenges

📅 5 days ago

The first half of 2026 sees a significant decline in Canadian nonresidential construction starts, reflecting broader economic pressures and uncertainty in trade relations.

In the first half of 2026, Canadian nonresidential construction starts have totaled $26.6 billion, marking the slowest pace for this period in five years. A comprehensive analysis reveals that seven out of nine construction categories have experienced declines in starts compared to the same timeframe last year. However, it's essential to recognize that some of this downturn is attributed to the exceptionally high baseline established by a record year in 2025. This overall pullback is indicative of more extensive economic conditions that are affecting the Canadian construction landscape.
The macroeconomic challenges facing Canada have been accumulating over the years, with recent developments exacerbating the situation. Trade relations with the United States have been tumultuous in the past eighteen months, beginning with the imposition of U.S. tariffs on a wide array of goods. Although the Canada-United States-Mexico Agreement (CUSMA) has provided some protection against these tariffs for compliant goods, the situation remains complex. The United States did not renew the agreement by the July 1 deadline, which has now transitioned to an annual review process lasting until 2036. While this extension provides some time, the uncertainty surrounding long-term business planning has become a hurdle for many.
These trade complications have contributed to a decrease in real exports, which fell by 5.2 percent in the first quarter of 2026 compared to the same period in 2025. Additionally, Canada has faced back-to-back GDP contractions in the fourth quarter of 2025 and the first quarter of 2026, further illustrating the economic challenges at hand. Compounding these issues, Statistics Canada has reported a declining population, with estimates showing a 0.5 percent decrease in Q2 2026 compared to the previous year. A significant factor in this decline has been the exit of non-permanent residents, which has decreased by 17 percent over the past year.
This combination of factors creates a challenging environment for the construction sector. The impact of U.S. trade policy has adversely affected Canadian exports, and the uncertainty surrounding these trade relationships has led to decreased investment as businesses adopt a wait-and-see approach. Furthermore, a shrinking population poses dual challenges: reduced demand for residential, educational, and commercial construction, and a potential shortage of labor in the construction industry, which has only seen a modest 1.5 percent increase in employment over the past year.
Despite the early-year weaknesses, there are still positive indicators within the construction market. A significant driver of optimism has been the federal government’s commitment to channeling substantial investment into major projects. The establishment of the Major Projects Office (MPO) has played a vital role in supporting large-scale initiatives since its inception last year. Several projects referred by the MPO broke ground in 2025, significantly boosting total nonresidential construction starts in the latter half of that year. A similar uptick could occur in the second half of 2026, as several MPO-referred projects are poised to commence, including the Ksi Lisims liquefied natural gas project.
Forecasts for total nonresidential starts for the full year remain above the levels observed before the substantial increases in 2024 and 2025, suggesting that starts may rebound as economic conditions improve. For firms operating in the construction sector, navigating this complex environment will require a more targeted approach to business planning. With the overall decline in construction starts, it is vital for firms to identify specific categories and geographical areas that are experiencing growth to seize emerging opportunities.
Devin Bell, an associate economist for ConstructConnect, emphasizes that while the current landscape poses challenges, there are also avenues for potential growth. The government's efforts to reduce dependency on the United States through increased public investment and incentives for the private sector could stimulate investment across various construction sectors, including energy, transportation, and community projects. This multifaceted approach may provide the necessary support to revitalize the construction market in the coming years.

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