Two Markets, One Industry: Where Canadian Construction Stands in Q4 2026

Canadian construction is running at two speeds. Housing is retrenching under weak condominium demand and higher borrowing costs, while non-residential building, engineering and public capital work are carrying the industry. The question for 2027 is whether the second can keep offsetting the first.

The headline numbers look healthier than the mood. Investment in building construction reached $23.5 billion in August 2026, up 7.9% from a year earlier, or 4.7% in constant dollars (Statistics Canada, Investment in building construction, August 2026). Construction GDP rose 1.3% in July, its fourth consecutive monthly gain, with non-residential building up 2.9% and engineering up 1.5% (Statistics Canada, GDP by industry, July 2026). Underneath those totals, the composition of activity is changing faster than at any point in the past decade.

On October 28, the Bank of Canada raised its policy rate to 2.50%, said that "housing is expected to remain relatively weak," and projected GDP growth of 1% in 2026 and 2% in 2027 (Bank of Canada, October 28, 2026). The same Monetary Policy Report raised its estimate of business investment's contribution to 2027 growth to 0.5 percentage points, from 0.2 in July, and put government spending's contribution at 0.7 points. Housing's contribution is estimated at minus 0.1 points in 2026 (Bank of Canada, October 2026 Monetary Policy Report). That is the market in three numbers: public and business capital rising, housing flat to negative.

Housing: starts holding, outlook falling

Housing starts have held up better than sales. CMHC reported a seasonally adjusted annual rate of 248,896 starts in September 2026 and a six-month trend of 250,411, essentially flat. Actual urban starts were down 4% year to date (CMHC, Housing starts, September 2026). The pipeline remains large, with 371,617 units under construction in centres of 50,000 or more and 143,929 permitted but not yet started.

The forward view is weaker. CMHC's July outlook projects national starts of 241,400 in 2026, 223,400 in 2027 and 211,900 in 2028, down from 259,028 in 2025 (CMHC, 2026 Housing Market Outlook, summer update). Its September Housing Supply Report estimates that restoring pre-pandemic affordability by 2036 would require 417,000 to 469,000 starts a year, against a business-as-usual pace of about 231,000 (CMHC, Housing Supply Report, Fall 2026).

Source: CMHC, 2026 Housing Market Outlook summer update (baseline, July 22, 2026) and Fall 2026 Housing Supply Report (Sept. 10, 2026)

CMHC's deputy chief economist, Aled ab Iorwerth, put the risk directly in the September release: "a key risk for Canada now is not building enough during this period of softening housing markets."

The condominium reset

The weakness is concentrated in one product. Only 156 condominium units were started in the City of Toronto in the first half of 2026, while rental apartment starts rose 82% and exceeded condo starts for the first time in decades. In Vancouver, condo starts fell 40%, the weakest first half since 2011, and purpose-built rental reached about 60% of starts. Montréal's rental share reached a record 86%, and Ottawa's condo starts fell 49%.

The sales data explains why. In the Greater Toronto Area, new condominium sales totalled 215 units in August, 78% below the 10-year average, against 19,030 units of new-home inventory, or 38.5 months of supply (BILD and Altus Group, via BNN Bloomberg). Because lenders typically require most units to be presold before releasing construction financing, a collapse in presales becomes a collapse in starts 12 to 24 months later. The rental shift is partly a financing shift, toward projects backed by CMHC programs rather than buyer deposits.

The regional picture is uneven. CMHC's six-month trend in September showed starts up 7% in Calgary, 6% in Vancouver and 5% in Edmonton, and down 8% in Montréal and 1% in Toronto. Edmonton is the only large market CMHC assesses as having no supply gap, with a record 17,900 units under construction.

Policy support for housing supply

Federal and provincial measures now operate on cost, financing and direct delivery at the same time.

• Direct delivery: Build Canada Homes, launched in September 2025 with $13 billion in capital and given statutory footing in June 2026, has identified six initial federal sites for about 4,000 homes in Toronto, Winnipeg, Edmonton, Longueuil, Ottawa and Dartmouth (Housing, Infrastructure and Communities Canada; BLG).
• Financing: the April 2026 Spring Economic Update accelerated more than $7 billion to CMHC for rental construction financing (Department of Finance).
• Development charges: agreements under the $51 billion Build Communities Strong Fund require the highest-charging jurisdictions to reduce development charges for three years, and Ontario has agreed to cuts of up to 50% (Spring Economic Update 2026, Chapter 1).
• Tax relief: the federal first-time buyer GST rebate of up to $50,000 is in force, and Ontario's HST rebate of up to $130,000 for all buyers of new homes up to $1.5 million runs to March 31, 2027 (CP24).

The measures are large, but most of them work on a lag. Development charge reductions and tax rebates affect project economics now; the starts they enable appear in 2027 and 2028, the same years in which CMHC's baseline shows the steepest decline.

Non-residential: the stronger side of the ledger

Non-residential building is where momentum is building. In the second quarter of 2026, non-residential permits rose by $1.9 billion to $15.4 billion, which Statistics Canada described as the largest quarterly increase in the series, while residential permits fell 4.3% (Statistics Canada, Building permits, June 2026). August permits rose 8.8% month over month to $13.6 billion, with industrial permits up $317 million, led by Alberta and Quebec (Statistics Canada, Building permits, August 2026). Institutional investment rose 1.9% in August, driven by school construction in the Toronto and Montréal areas.

Private commercial real estate is more cautious. CBRE reports 25.4 million square feet of industrial space under construction nationally in the third quarter, about 1.2% of inventory, with 2026 deliveries projected at 19.3 million square feet, the lowest in eight years (CBRE, Canada Industrial Figures Q3 2026). Office construction stands at 1.4 million square feet, just above a 22-year low (CBRE, October 2026). Where office activity exists, it is increasingly conversion work; Calgary reports it is nearly halfway to its goal of removing six million square feet of downtown office space through conversions (LiveWire Calgary).

Data centres are a new category of demand. Meta has begun construction on a data centre in Sturgeon County, Alberta, valued at more than $13 billion, with about 3,000 construction workers expected at peak (Meta, July 2026). Statistics Canada noted that imports of processors for data centres helped lift machinery and equipment investment to its highest level since 2024 in the second quarter (Statistics Canada, Q2 2026 national accounts).

The major projects pipeline

The largest source of future construction demand is a small number of very large projects, most of them in energy, transportation and trade infrastructure. BuildForce Canada tracks nearly 800 major projects worth more than $500 billion nationally (BuildForce Canada). The federal Major Projects Office lists 16 referred projects and seven strategies valued at more than $135 billion (Government of Canada, June 2026).

The timing of these projects matters as much as their value. Most are in early design, regulatory review or initial site work, so their peak labour and materials demand falls between 2028 and the mid-2030s. That matches BuildForce's projection that non-residential investment will rise into 2029, with provincial peaks spread from 2027 in British Columbia to 2031 in Newfoundland and Labrador.

Public capital as the stabilizer

Government capital spending is the most predictable support for the industry over the next three years. Budget 2025 set out $115 billion for infrastructure over five years (ReNew Canada). The Build Communities Strong Fund commits $51 billion over 10 years, then $3 billion a year on an ongoing basis. The Canada Infrastructure Bank's capital authority was raised to $45 billion in March 2026, on top of $18.1 billion committed across 108 projects (Canada Infrastructure Bank, 2026-27 Corporate Plan Summary). Defence adds a further channel, with $81.8 billion over five years in Budget 2025 and more than $8 billion in active defence infrastructure projects (National Defence).

Statistics Canada's survey of capital spending intentions, conducted early in the year, showed planned construction spending of $274.0 billion in 2026, up 5.9%, with the public sector accounting for $163.4 billion of total capital spending (Statistics Canada, Capital and repair expenditures, 2026 intentions).

Business confidence after the trade breakdown

Trade negotiations between Canada and the United States broke down on August 21, 2026, followed by 50% US tariffs on about $20 billion of Canadian goods and Canadian counter-tariffs from September 8 (PBS NewsHour, AP). The effect on construction demand so far appears limited. The Bank of Canada's third-quarter Business Outlook Survey found that the share of firms planning for a recession fell to 6% from 17%, and that investment intentions "eased slightly but remain robust." Housing-related firms described demand as "stabilizing, not recovering," while infrastructure and defence spending supported other firms' outlooks (Bank of Canada, Business Outlook Survey, Q3 2026). The survey's fieldwork ended on September 2, before the counter-tariffs took effect.

What to watch

Several releases due before year-end will test this picture:

• Federal Budget 2026, November 5: the scale and timing of infrastructure and housing commitments, and the fiscal room for them.
• Building permits, November 12, and investment in building construction, November 19: whether the non-residential momentum of the second quarter carried into the autumn.
• Housing starts, November 17: whether the six-month trend holds near 250,000 as the condominium pipeline thins.
• Third-quarter GDP, November 30: the first full read on residential and engineering investment after the trade breakdown.
• Bank of Canada, December 9: whether the October increase is followed by another.

The Canadian construction market enters 2027 with demand that is real, financed and in many cases already contracted, but unevenly distributed. Residential builders face the weakest outlook in several years, while civil, energy, institutional and digital infrastructure contractors face the fullest order books in a generation. Firms able to move between those markets will be best placed.