Material and labour charges surge as voracious demand in the province pushes costs up nearly eight per cent in the second quarter
Gillian Shaw
Sun
British Columbia‘s building boom coupled with higher fuel prices combined to push Vancouver‘s non-residential building costs up almost eight per cent in the second quarter of this year over the same period a year ago, the biggest hike of any city across Canada.
According to figures released Friday by Statistics Canada, the composite price index for non-resident construction in Canada reached 132.6 in the second quarter, an increase of 1.7 per cent over the previous quarter and a jump of 5.9 per cent over the second quarter of last year.
Vancouver led the year-over-year increase, followed by Edmonton and Calgary, both tallying a 7.1-per-cent increase over the same quarter a year ago, Montreal at 5.5 per cent, the Ottawa area at 4.4 per cent and Halifax at 3.8 per cent.
The news comes as no surprise to B.C.’s building sector, which has watched materials and labour costs trend upward as a voracious demand drives the construction market.
“What this does is it verifies what the industry has been experiencing, not only in Vancouver but across the province,” said Manley McLachlan, president of the British Columbia Construction Association. “We are hearing from our members that the level of activity has increased substantially.
“They have been busy for a long time but their rate of activity has been growing substantially.”
Increasing demand in non-residential building construction has been pushing up costs for labour and rising fuel bills in the second quarter of this year have exacerbated that.
With skilled construction workers the new stars of the employment picture, builders have to up the ante to attract and keep staff.
Chris Erb, whose company SubErb Construction on Vancouver Island operates in both residential and commercial construction, said for the first time in his career as a contractor, he has had to add a benefits package to his workers’ pay.
“The only way you are going to keep people on the job right now is that you have to go the extra mile for employees,” he said. “What’s driving it now is demand — there are no trades period, residential or commercial, and to get the people you have to pay more money.”
Erb said his employees now have a full benefits package including extended health, insurance and dental.
“It is the only way I feel right now that you are going to be able to separate yourself from everybody else and keep your employees,” he said.
Employers pass along the increased labour costs to their customers, said Erb, who is also second vice-president of the Canadian Homebuilders’ Association of B.C. and president of the association’s local chapter.
But while billions of dollars in non-residential construction are slated or underway in Vancouver and the rest of the province, McLachlan said project estimates would have taken into account rising construction costs.
“We’ve been in this heated market for some time now,” he said. “People who are involved in planning projects have taken this into consideration. It is a not a one-off event, it is a reality and if you haven’t done your budgeting to include some escalation in those areas, you haven’t done a very good job in costing your work out.”
Keith Sashaw, president of the Vancouver Regional Construction Association, said while owners of construction companies are looking at estimates to see what can be done to mitigate the cost increases, no projects have been slowed or stopped due to rising costs.
“A lot of the anticipated increases have been factored in as projects have been tendered and go forward,” he said.
Kerry Jothen, human resources analyst and chief executive officer of Human Capital Strategies, said the labour shortage has put upward pressure on wages.
“The starting wage even just for labourers and people in entry level positions in construction has gone up in the past six months,” he said. “People who are delivering the training programs are getting calls from the construction industry and employers are saying they need somebody today, or yesterday.”
© The Vancouver Sun 2005