Thoughts on the construction business in Canada?

August 06, 2024

by a searcher in Ladysmith, BC, Canada

I've been thinking about the construction industry in Canada and wanted to share some observations. It’s a large part of our economy and employs a lot of people across different sectors. We're seeing some interesting trends, like fluctuations in the housing market, increased infrastructure projects, and a growing emphasis on green building practices. There are definitely challenges, such as regulatory compliance, skilled labor shortages, and rising material costs. But there are also many opportunities, like urbanization, advances in construction technology, and the demand for renovations.

I’m curious to hear from others in the industry. What are your thoughts on these trends and challenges? Looking forward to hearing your perspectives!

Reply by a searcher
from Dalhousie University in Toronto, ON, Canada

Thanks for the tag ^redacted‌. Our fund has a focus in the construction space (amongst a few other market segments) so we know the industry fairly well. I could probably write a full blog post on my thoughts, but to summarize: expect a major downturn if the company focuses on new build residential construction over the next 1-3 years (depending on what phase of the project they service), be weary of bad debts and ballooning AR, place emphasis on backlog but be sure to vet the backlog and don't overpay just because the backlog looks healthy. I could chat a lot more, if anyone would like to dive deeper.

Reply by a searcher
in Oakville, ON, Canada

Thanks for the tag ^redacted‌. There is definitely a slowdown in the construction industry due to interest rates. However, you can always find a niche in the industry which isn't affected as much during slow down. For example, HVAC and Plumbing VS home renovation business. Not many thinking of replacing windows which may not be energy efficient, but someone with a bad HVAC or leaking pipe will need replacements or repair asap.
The above comments also state great points like barriers to entry. There is no perfect business or industry, just need to find the right one that makes sense for you.

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