2025 outlook: 5 key themes for Canadian construction

Key Takeaways:

• Canada’s construction sector is anticipated to recover from a 3.1% output decline in 2024, growing at an annual average rate of 2.2% from 2025 onward.
• This growth will likely be driven by government investments in transport, renewable energy, healthcare, education, and a gradual recovery in the residential market.
• Declining interest rates, stabilizing inflation, and increased efforts to recruit younger workers have improved the sector’s outlook. However, uncertainties such as economic volatility, geopolitical tensions, and fluctuating market conditions continue to pose risks, particularly in financing new housing projects and addressing supply chain disruptions.
• The return of Donald Trump as U.S. President and related trade policies, such as a threatened 25% tariff on Canadian imports, could severely impact Canada’s economy and the construction sector.
• Additionally, geopolitical challenges, including war in Ukraine, tensions in the Middle East, and the renewal of the Canada-U.S.-Mexico trade agreement in 2026, add layers of uncertainty to the industry’s future.

The Whole Story:

Is Canada’s construction sector on track to soar in 2025 or crash and burn?

As we peer into the future, some experts believe a rebound is on the horizon. But others feel the next 12 months will be a mixed bag of growth and risk. However, all agree that our neighbours down south will play a large role. 

Here are some of the key themes experts have their eyes on for the coming year:

Donald Trump and the U.S.

Don’t expect to see incoming president Donald Trump disappear from headlines anytime soon. All construction experts we spoke with cited the U.S. as a huge factor for 2025.

Jock Finlayson, Chief Economist with the Independent Contractors and Businesses Association (ICBA), had this to say about Trump: 

“Should he carry forward with the threat to levy a 25% across-the-board tariff on all goods imported from Canada (and Mexico), the Canadian economy will quickly be catapulted into a recession. Looking a little further ahead, the Canada-U.S.-Mexico trade agreement (CUSMA) is up for renegotiation/renewal in 2026.  That, too, represents a risk for Canada, as with Trump in the White House there is a chance the agreement itself could be scrapped.”

Canadian Construction Association President Rodrigue Gilbert also expressed concerns about developments in U.S. politics. 

“It’s hard to not focus on the American election and the impact this will have on our industry. With just a few weeks before his inauguration, President Trump has been able to create uncertainty, economic disruption and sow division amongst our governments,” he said. “Between tariffs, border management, a nationalistic economic policy, it’s safe to say the Canadian Government was not prepared and it affected our industry. We are hopeful that this will be handled in the new year and that the effect on Canada’s construction industry will be minimal.”

Interest rates

Interest rates have been a ray of sunshine during 2024 and experts believe the warmth could continue into 2025. 

“Over the past 18 months, the construction sector has benefited from several positive developments,” said Bill Ferreira, Executive Director of BuildForce Canada. “One of the most significant has been the steady decline in interest rates, which has started to ease financing pressures on new projects and investments.”

Finlayson called it the main reason for optimism about the economic environment in the coming year. 

“This should be helpful in setting the stage for increased investment across all segments of the construction business – homebuilding, the industrial sector, engineering infrastructure, etc.,” he said. “The outlook for new office development is less favourable, given the stickiness of the work-from-home phenomenon and significantly higher office vacancy rates in many cities.” 

However, Linesight Executive Vice President Patrick Ryan noted that while decreased construction activity in some sectors has alleviated demand temporarily, a potential rise in activity due to falling interest rates could push labor costs back up. Regions with significant high-tech and mission-critical projects still struggle with a lack of skilled labor, particularly in the MEP trades.

Rebounding

Linesight anticipates the residential sector is to rebound in 2025, supported by lower interest rates and government initiatives aimed at reducing the housing deficit. These include affordable housing programs, tax incentives like the removal of the Goods and Services Tax on new rental projects, and significant investments to increase the housing stock. 

From 2025 onwards, the construction industry is expected to recover and grow at an annual average rate of 2.2%. This growth will be fueled by substantial government investments in transportation infrastructure, renewable energy projects targeting carbon neutrality by 2050, and the expansion of healthcare and educational facilities. The largest infrastructure project in the pipeline is the US$17bn Alberta to Alaska rail line development project.

Some believe this recovery will be slow to pick up steam. 

“It will take time for companies to get settled again, and not only feel more confident in the market – but start executing in a way that reflects that confidence,” shares Raymond Wong, Vice President of Client Delivery at Altus Group. “Canada is facing a significant challenge on the employment side, and I think that will take some time for the labour market – and the economy at large – to reflect the positive impact of the rate-cutting cycle.”

Labour unrest 

In 2024, Canada experienced significant labour unrest, with major strikes affecting postal services and ports. The Canada Post strike, which began on November 15 and lasted 32 days, involved approximately 55,000 postal workers demanding better wages and working conditions. It ended on December 17 after government intervention. 

Concurrently, port strikes hit Canada’s major maritime hubs, with lockouts at the Ports of Montreal and Vancouver starting in early November. These disputes involved dockworkers, the Maritime Employers’ Association, and the International Longshoremen’s Association, centering on issues of scheduling and wage increases. The strikes at Canada’s two busiest ports, along with actions at East Coast terminals, severely disrupted supply chains. On November 13, Labour Minister Steve MacKinnon ordered the Industrial Relations Board to intervene, citing daily economic impacts of $1.3 billion. These labour disputes significantly disrupted Canada’s postal and port operations.

With the rise of artificial intelligence threatening to shrink some industries and the overall challenging economic climate, it is likely that we could see more labour unrest going into 2025. And depending on which sector its in, major supply chains could be impacted. 

Optimism

Despite the challenges and uncertainty ahead, many experts believe builders will rise to meet them.

“2025 is gearing up to be another interesting year,” said Gilbert. “With our neighbours to the south welcoming a new (old) President to the White House and as we prepare for the certainty of a federal election here at home, I’m optimistic because I know that no matter the challenges ahead, our industry is resilient, ready and willing to work.

He also noted that there is significant momentum within the Canadian government to finally tackle real challenges, like workforce and the reduction of red tape, which will allow the industry to build the infrastructure and projects Canadians need.