After cancellation of a Victoria condo development more fallout from boom expected
Daphne Bramham
Sun
For the past couple of years there have been dire warnings about an acute shortage of construction workers caused by the Olympics, Olympic-related projects such as the RAV line and a booming housing market.
Well, the first dead canary in the mine shaft, if you will, was reported this week.
Anthem Properties cancelled its upscale condo development in downtown Victoria even though it had pre-sold 90 per cent of the units. Buyers will have their deposits refunded plus five-per-cent interest.
The labour scarcity had increased construction cost estimates by more than $10 million to $35 million in little more than six months. And CEO Eric Carlson told the Victoria Times Colonist that even that estimate was based on the assumption that everything would go perfectly — an assumption that he said is completely unrealistic.
“It’s definitely an alarm bell,” the president of the B.C. Construction Association told me. Manley McLachlan said it’s the first project he’s heard of that has been cancelled due to a shortage of skilled workers, but he expects more to come.
And while Anthem’s project was the first dead canary in the residential construction industry, a high school planned by the New Westminster school board was the first victim in the public sector. The school complex, which was to have included a theatre and community centre, has been delayed because what started as a $60-million project was heading toward $80 million and that was even before the sod was turned.
All of this means trouble — Trouble with a capital T as the Music Man said.
Cancelling the Victoria condo project doesn’t only mean a loss of $35 million in economic activity, McLachlan says others may think twice before they invest in construction projects.
If developers stop building homes, not only will economic activity decline, demand will push real estate prices even higher and the near-zero rental vacancy rates in the Lower Mainland and Victoria could become chronic.
In the meantime, the labour shortage can’t help but affect the 2010 Winter Games with its unmovable deadline. Unlike the New West school board or Anthem Properties, the Games must go on and the B.C. government is locked into paying for any cost overruns.
Just how high labour shortages are pushing up costs is unknown. The organizing committee hasn’t released the updated — and now outdated — estimates that were done last fall. But it’s not good. Vanoc’s chief executive John Furlong has been publicly wringing his hands about the skyrocketing costs for a few months, even after Vanoc scaled back projects by $85 million. Colin Hansen, the B.C. minister in charge of the Games, started begging for more federal help in December.
Now, with Stephen Harper’s minority Conservatives in power, it’s unclear what the answer will be.
If Harper says no, then the choices get tough. The B.C. government really has only three choices: Borrow more money, raise taxes, or spend less on badly needed hospitals, schools, bridges, power plants, sewage systems, water treatment or ports.
As hard as this is on the public spending side, things could be worse on the revenue side.
Construction is a huge driver of the economy. In September, the value of the major projects underway in B.C. alone (those worth $15-million-plus) was $33 billion. A further $48-billion worth were proposed and $22-billion worth was in the advanced planning stage.
Hundreds of billions of dollars of investment are at risk over the longer term.
But there’s no simple or fast fix.
McLachlan says British Columbia needs 75,000 additional construction workers by 2013. Alberta needs a similar number and even Saskatchewan is reporting a shortage.
Sure, we’ve got better weather. But why would experienced electricians uproot their families and move to the highest-priced housing market in Canada?
Over the longer term, we simply don’t have enough kids to train. But even if we did, we don’t have enough kids who think being a plumber, pipe-fitter, electrician or construction supervisor is good enough for them.
For too long, Canadians have viewed construction at best as a starter job for their children en route to a better career or a job for immigrants.
We haven’t invested in training and apprenticeships. We haven’t respected the work that tradespeople do. And now we’re paying the price.
© The Vancouver Sun 2006