Construction Sector Sees GDP Growth But Tariffs and Labour Shortages Pose Ongoing Challenges

Canada’s construction sector posted strong economic performance this past quarter, according to the Canadian Construction Association’s Winter 2026 Economic Insights Report. The industry’s GDP rose to $170 billion in Q3, a 1.3% increase over the previous quarter, outpacing the national average of 0.5%. Year-over-year, the sector grew 2.6%, more than double the all‑industry rate of 1.1%.

This marks the largest quarter‑over‑quarter gain in 3.5 years and the sixth consecutive quarter of growth, driven primarily by engineering and infrastructure-related construction.

But despite this momentum, the report highlights significant pressures that continue to shape the cost and pace of building in Canada.

Rising Costs Driven by Tariffs and Materials

The Building Construction Price Index rose 4.2% year-over-year, reflecting higher costs for:

• Metal fabrication
• Structural steel
• Plumbing systems

Regions such as London, Ontario, and Quebec City saw some of the steepest increases. Factory construction costs rose 5.7%, while office building costs climbed 3.2%.

A major culprit? Tariffs.

The trade dispute between Canada and the U.S. continues to squeeze supply chains:

• 16.4% of construction businesses report major negative effects from Canadian tariffs on U.S. goods.
• 13.6% report major disruptions from U.S. tariffs on Canadian goods.

These tariffs affect materials that Canada cannot readily produce domestically, making projects more expensive and more unpredictable.

With Canada’s new global 25% tariff on steel derivative products taking effect on Dec. 26, and tariff remissions set to expire Jan. 31, these cost pressures are expected to continue well into 2026.

Labour Shortages Remain a Serious Concern

In addition to material costs, the sector faces mounting labour challenges:

• A projected shortfall of 108,300 construction workers by 2034.
• 22% of the residential construction workforce is expected to retire in the next decade.

These demographic pressures compound delays and increase labour costs, at a time when Canada needs to dramatically scale housing construction.

As Rodrigue Gilbert, president of the Canadian Construction Association, put it:

“The opportunities ahead for our industry are significant, but so are the risks.”

How Does This Affect You?

Homeowners

• Expect continued upward pressure on construction costs, especially for builds requiring metal, plumbing systems, or structural steel.
• Labour shortages may affect timelines for custom homes, additions, and renovations.

Residential Developers

• Tariff‑driven material costs will impact budgeting and project viability, especially on mid‑rise and multiplex projects.
• Skilled labour shortages may require more strategic scheduling and pre‑construction planning.

Commercial Property Owners

• Office, factory, and retail construction will feel the impact of rising material costs, particularly steel-heavy structures.
• Supply chain uncertainty means early procurement strategies are more important than ever.

UTES Design & Build: Helping You Build Smarter in a Challenging Market

At UTES Design & Build, we expertly navigate the rising costs, labour constraints, and regulatory shifts shaping today’s construction environment. Our integrated architecture + engineering approach ensures:

• Smarter material choices
• Optimized designs that reduce waste
• Early risk identification
• Streamlined scheduling and coordination
• Reliable cost projections in a volatile market

Whether you're planning a custom home, an addition, a garden suite/laneway suite, a multiplex, or a commercial development, we help you build efficiently, even when the market isn’t.

Contact us today to discuss how these economic trends may impact your next project and how to plan for them proactively.