Vancouver Island Construction Report for Q3-2017

Vancouver Island Construction Report for Q3-2017 SUMMARY Construction activity increased on Vancouver Island during the third quarter of 2017 with building permits and construction employment rising. Robust conditions resulted in faster increases in construction costs. In the third quarter, building permits increased 5% to $647.5 million over the second quarter on Vancouver Island. More residential and non-residential permits contributed this overall gain. Industrial and Institutional-government building permits more than doubled in the quarter. All regional districts but two (Nanaimo and Mt. Waddington) on the Island saw more permits issued in the third quarter. The largest percentage gains were recorded in the Alberni-Clayoquot and Strathcona regional districts at 70% and 51%, respectively, from the second quarter. The Nanaimo Regional District saw a 1% decline. The Capital Regional District posted a 5% increase in the quarter led by a 15% jump in the West Shore communities. Building permits issued, year to date, were 18% higher at $1.712 billion for Vancouver Island compared to the first three quarters of last year. Residential permits were 23% higher, with non-residential up 5%. All regional districts on the Island, except Comox Valley, had more permits issued this year than last year. Capital Region District permits were 28% higher at $1.064 billion. Non-residential building construction investment spending in the Victoria Metro area posted a 13% increase in the third quarter over the second. Non-residential construction costs increased at a faster pace of 6.7% in the third quarter. Construction employment on the Island continued to rise in the third quarter with most of the gain this year in the Victoria Metro area. The outlook for the Island s construction industry remains positive in 2018 with further economic and population growth fueling the demand for residential and non-residential space. A low interest rate environment also provides impetus to real estate demand. TABLE OF CONTENTS [ 2 ] BUILDING PERMITS [11] CONSTRUCTION EMPLOYMENT [12] OUTLOOK [13] STATISTICAL APPENDIX ON WESTERN COMMUNITIES 1 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

Building VANCOUVER ISLAND Building permits grew 5% in the third quarter of 2017 from the second quarter on a 7% rise in non-residential permits and a 4% increase in residential permits. Compared to the same quarter in 2016, total permits were 15% higher with residential up 20% and non-residential 3% higher. The third quarter of 2017 saw large increases in industrial and government permits issued, while commercial permits came off a high level in the second quarter. issued year-to-date were 18% higher at $1.712 billion in 2017 compared to $1.453 billion last year. Residential permits were 23% higher in the first three quarters of this year compared to same period last year. Non-residential permit activity was little changed at $411.4 million, up 5% from last year. Commercial permits were 16% higher than last year at $220.8 million. Institutionalgovernment and industrial permits were 6% lower in the first three quarters than last year. Building Issued Vancouver Island Non-Residential Industrial Commercial Residential Apr-Jun-17 617,071 148,852 12,111 103,150 33,591 468,219 1,637 Jul-Sep-17 647,510 159,239 25,981 61,824 71,434 488,271 2,272 % change 5 7 115-40 113 4 39 Jul-Sep-16 562,695 155,223 10,296 40,005 104,922 407,472 1,726 Jul-Sep-17 647,510 159,239 25,981 61,824 71,434 488,271 2,272 % change 15 3 152 55-32 20 32 Jan-Sep-16 1,452,987 392,194 58,516 189,682 143,996 1,060,793 4,162 Jan-Sep-17 1,711,585 411,371 55,251 220,858 135,262 1,300,214 5,138 % change 18 5-6 16-6 23 23 Source: Statistics Canada, VICA. PERMITS BY REGION/MUNICIPALITY CAPITAL REGIONAL DISTRICT (CRD) WEST SHORE COMMUNITIES COWICHAN VALLEY REGIONAL DISTRICT NANAIMO REGIONAL DISTRICT ALBERNI-CLAYOQUOT-REGIONAL DISTRICT STRATHCONA REGIONAL DISTRICT COMOX VALLEY REGIONAL DISTRICT MOUNT WADDINGTON REGIONAL DISTRICT 2 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

CAPITAL REGIONAL DISTRICT (CRD) permits were up 3% in the third quarter over the second quarter of 2017. The dollar value of residential permits increased 6% in the quarter while the number of units climbed 54% over the second quarter. Institutional-government permits jumped 80% in the third quarter mostly offsetting large declines in industrial and commercial permits. non-residential permits slipped 3%. Compared to the third quarter of last year, total permits were 40% higher, led by a 46% increase in residential permits. Non-residential permits were up 26% largely on a 155% surge in commercial permits. In the first three quarters of the year, total permits were 28% higher at $1.064 billion compared to $830.5 million in the same period of 2016. Residential permits have risen 34% to $773.9 million year-to-date with the number of dwelling units up 45%. Year-to-date non-residential building permits were lifted by a 26% increase in government permits and a 22% rise in commercial permits. Industrial permit activity was 28% lower. Building Issued Capital Regional District Non-Residential Industrial Commercial Residential Apr-Jun-17 403,071 116,948 9,000 75,887 32,061 286,123 978 Jul-Sep-17 415,794 112,879 5,638 49,506 57,735 302,915 1,505 % change 3-3 -37-35 80 6 54 Jul-Sep-16 297,761 89,921 3,596 19,413 66,912 207,840 775 Jul-Sep-17 415,794 112,879 5,638 49,506 57,735 302,915 1,505 % change 40 26 57 155-14 46 94 Jan-Sep-16 830,512 251,272 40,030 130,002 81,240 579,240 2,077 Jan-Sep-17 1,064,380 290,510 28,950 159,059 102,501 773,870 3,015 % change 28 16-28 22 26 34 45 Source: Statistics Canada, VICA. 3 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

WEST SHORE COMMUNITIES Building permits increased 15% in the third quarter compared to the previous quarter, led by a 40% jump in non-residential permits. Non-residential permits were boosted by $8.3 million in institutional-government permits issued in the quarter. Commercial permits, the larger component, rose six%. The dollar value of residential permits rose 10% over the second quarter, while the number of units jumped 41%. Building permits were well ahead of the same quarter last year at 23% though nonresidential permits were 24% lower. Residential permits were 40% higher on dollar value and 85% higher on units. This year s activity is up a robust 41% to $377.3 million, led by a 47% surge in residential permits to $324.3 million. Year-to-date non-residential permits were led by a 144% increase in commercial permits, which offset lower activity in industrial and government permits. Building Issued West Shore Communities Non-Residential Industrial Commercial Residential Apr-Jun-17 128,182 16,643 1,185 15,388 70 111,539 472 Jul-Sep-17 147,648 24,716 30 16,376 8,310 122,932 665 % change 15 49-97 6 ## 10 41 Jul-Sep-16 120,307 32,588 367 6,138 26,083 87,719 359 Jul-Sep-17 147,648 24,716 30 16,376 8,310 122,932 665 % change 23-24 -92 167-68 40 85 Jan-Sep-16 267,568 46,711 2,521 16,900 27,290 220,857 873 Jan-Sep-17 377,319 52,999 1,484 41,270 10,245 324,320 1,444 % change 41 13-41 144-62 47 65 Source: Statistics Canada, VICA. Note: Includes Colwood, Highlands, Langford, Metchosin, Sooke, and View Royal. # undefined; ## More than 1,000 %. 4 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

COWICHAN VALLEY REGIONAL DISTRICT building permits edged up 5% in the third quarter over the second. Compared to the third quarter of 2016, total permits were 4% lower. The year-to-date comparisons were more robust with a 20% gain recorded this year to $124.4 million. Non-residential permits jumped 81% through to the third quarter this year led by large gains in government and commercial permits. Residential permits climbed 9% in the first nine months to $94.9 million. Building Issued Cowichan Valley Regional District Non-Residential Residential Industrial Commercial Apr-Jun-17 38,085 3,885 499 2,940 446 34,200 146 Jul-Sep-17 39,998 4,365 1,305 2,808 252 35,633 140 % change 5 12 162-4 -43 4-4 Jul-Sep-16 41,870 6,426 3,633 1,114 1,679 35,444 145 Jul-Sep-17 39,998 4,365 1,305 2,808 252 35,633 140 % change -4-32 -64 152-85 1-3 Jan-Sep-16 103,699 16,308 7,548 5,639 3,121 87,391 362 Jan-Sep-17 124,412 29,494 3,347 10,321 15,826 94,918 394 % change 20 81-56 83 407 9 9 Source: Statistics Canada, VICA. 5 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

NANAIMO REGIONAL DISTRICT A decline in residential permits held back total permits in the third quarter. permits slipped 1% lower to $112.1 million in the third quarter over the second. Residential permits were down 18% in the quarter to $76.9 million from $93.5 million in the previous quarter. Non-residential permits were 78% higher due to large spikes in institutional-government and industrial permits in the third quarter. Commercial permits fell 71% from the second quarter. Year-to-date permits activity was modestly higher than in the same period last year. permits were up 7% with non-residential up 11% and residential up 6%. Building Issued Nanaimo Regional District Non-Residential Residential Industrial Commercial Apr-Jun-17 113,329 19,792 965 18,467 360 93,537 319 Jul-Sep-17 112,120 35,201 18,099 5,309 11,793 76,919 328 % change -1 78 ## -71 ## -18 3 Jul-Sep-16 119,653 17,278 916 10,362 6,000 102,375 550 Jul-Sep-17 112,120 35,201 18,099 5,309 11,793 76,919 328 % change -6 104 1876-49 97-25 -40 Jan-Sep-16 298,429 61,086 5,584 34,154 21,348 237,343 1,124 Jan-Sep-17 319,388 67,715 19,746 35,675 12,294 251,673 1,041 % change 7 11 254 4-42 6-7 Source: Statistics Canada, VICA. # undefined; ## More than 1,000 %. 6 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

ALBERNI-CLAYOQUOT REGIONAL DISTRICT A large jump in residential permits issued boosted total building permits 70% higher than the second quarter. permits came in at $13.4 million in the third quarter with residential contributing $12.7 million. Non-residential permits fell in the third quarter from the second quarter and from one year ago. Year-to-date total permits were 18% higher over the same period last year. Residential permits rose 13% to $26.1 million, while non-residential jumped 46% to $6.1 million Building Issued Alberni-Clayoquot Regional District Non-Residential Industrial Commercial Residential Apr-Jun-17 7,891 2,863 23 2,835 5 5,028 16 Jul-Sep-17 13,422 684 206 445 33 12,738 50 % change 70-76 796-84 560 153 213 Jul-Sep-16 9,133 956 180 476 300 8,177 27 Jul-Sep-17 13,422 684 206 445 33 12,738 50 % change 47-28 14-7 -89 56 85 Jan-Sep-16 27,350 4,196 1,737 1,485 974 23,154 74 Jan-Sep-17 32,213 6,123 289 5,775 59 26,090 95 % change 18 46-83 289-94 13 28 Source: Statistics Canada, VICA. 7 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

STRATHCONA REGIONAL DISTRICT A large increase played out in the third quarter with total permits increasing 51% over the second quarter lifted by both residential and non-residential permits. Residential permits climbed 53% to 425.3 million in the quarter while non-residential rose 36% to $2.7 million. The year-ago comparison was 95% higher for total permits, led by a 114% jump in residential permits. However, year-to-date total permits were at about the same level as last year, only one% higher. Residential permits were 24% higher at $53.1 million and offset the 57% drop in nonresidential permits. Building Issued - Strathcona Regional District Non-Residential Residential Industrial Commercial Apr-Jun-17 17,215 1,967 163 1,305 499 15,248 53 Jul-Sep-17 25,934 2,673 272 2,401 0 23,261 137 % change 51 36 67 84-100 53 158 Jul-Sep-16 13,289 2,415 188 1,567 660 10,874 36 Jul-Sep-17 25,934 2,673 272 2,401 0 23,261 137 % change 95 11 45 53-100 114 281 Jan-Sep-16 60,125 17,439 618 10,249 6,572 42,686 172 Jan-Sep-17 60,631 7,543 675 6,369 499 53,088 254 % change 1-57 9-38 -92 24 48 Source: Statistics Canada, VICA. 8 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

COMOX VALLEY REGIONAL DISTRICT Residential permits lifted total permits higher in the third quarter of 2017. permits rose 10% to $38.4 million in the third quarter on an 11% rise in residential permits to $36.1 million. Non-residential permits slid two% lower in the quarter. were lower than one year ago across all categories. Year-to-date permits totaled $104 million this year, down 21% from the same period last year. Residential permits were 10% higher while non-residential fell 86%. Non-residential permits were lower in all three categories, most notably in the institutionalgovernment sector with a 96% drop from a very high level last year. Building Issued Comox Valley Regional District Non-Residential Industrial Commercial Residential Apr-Jun-17 34,808 2,321 1,461 640 220 32,487 122 Jul-Sep-17 38,360 2,264 454 1,345 465 36,096 110 % change 10-2 -69 110 111 11-10 Jul-Sep-16 80,303 38,069 1,750 6,948 29,371 42,234 192 Jul-Sep-17 38,360 2,264 454 1,345 465 36,096 110 % change -52-94 -74-81 -98-15 -43 Jan-Sep-16 131,119 41,640 2,966 7,933 30,741 89,479 349 Jan-Sep-17 104,000 5,765 2,037 2,558 1,170 98,235 334 % change -21-86 -31-68 -96 10-4 Source: Statistics Canada, VICA. 9 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

MOUNT WADDINGTON REGIONAL DISTRICT Third quarter permits fell 30% from the second quarter mainly on residential permits. Compared to the same quarter last year, residential and non-residential permits were considerably higher. Year-to-date total permits were nearly triple last year s level on large increases in nonresidential permits, led by institutional-government. Residential permits were 56% higher to $2.3 million. Building Issued Mount Waddington Regional District Non-Residential Industrial Commercial Residential Apr-Jun-17 2,672 1,076 0 1,076 0 1,596 3 Jul-Sep-17 1,882 1,173 7 10 1,156 709 2 % change -30 9 # -99 # -56-33 Jul-Sep-16 686 158 33 125 0 528 1 Jul-Sep-17 1,882 1,173 7 10 1,156 709 2 % change 174 642-79 -92 # 34 100 Jan-Sep-16 1,753 253 33 220 0 1,500 4 Jan-Sep-17 6,561 4,221 207 1,101 2,913 2,340 5 % change 274 ## 527 400 # 56 25 Source: Statistics Canada, VICA. # undefined; ## more than 1,000 %. 10 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

Construction Employment Construction employment on the Island remained at a high level and edged up in the third quarter. There was some slippage in Victoria, while there was a substantial gain in the rest of the Island. In the first three quarters of 2017, employment was 2.4% higher than the same period in 2016, with the entire increase occurring in Victoria. The small sample size in the Labour Force Survey results in considerable quarterly variation. Seasonal adjustment removes some but not all this variability. The underlying trend is increasing in both Victoria and the rest of the Island, with Victoria slightly stronger. Construction Industry Employment Vancouver Island Victoria Vancouver Island and Coast Metropolitan Area excluding Victoria (Persons thousands) Q2-2017 34.5 16.3 18.2 Q3-2017 35.5 15.5 20.0 % change 2.9-4.9 9.9 Q1-Q3-2016 33.8 12.2 21.6 Q1-Q3-2017 34.6 15.6 19.0 % change 2.4 27.9-12.0 Source: Statistics Canada, VICA. Note: 3-month average at end of quarter. Averages for year-to-date. Components may not add due to rounding. Seasonally Adjusted Construction Employment Vancouver Island and Coast Victoria Metropolitan Area Vancouver Island excluding Victoria (Persons thousands) Q3-2016 36.8 13.2 23.4 Q4-2016 36.9 15.6 21.5 Q1-2017 34.6 14.9 19.7 Q2-2017 34.8 16.6 18.1 Q3-2017 34.6 15.4 19.2 % change Q2-17/Q1-17 -4.1-12.8 18.2 Source: Statistics Canada, VICA. Note: 3-month average at quarter end. Components may not add due to rounding. 11 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

Outlook The Island s construction sector is very active with more building sites underway, rising construction employment, and accelerating construction costs. The industry s upturn, which began in early 2014, is setting higher activity levels with each passing quarter. Residential construction was the initial driver and continues to be the main force behind the upturn. Recently, non-residential construction has turned up sharply to give added impetus to this construction cycle. The outlook for residential construction remains positive with improving external and local economic conditions expected in 2018. Tight housing markets characterized by rising prices and low vacancy rates will require more supply and new construction to meet demand. The stress test for uninsured mortgages required by the federal bank regulator in the new year will reduce home sales to some extent as will gradually higher mortgage rates. However, other demand drivers, such as job and income growth and in-migration from other parts of BC and other provinces, provides a high sales floor. Non-residential building construction will also expand with the Island s improving economy, though at a variable pace due to the large nature of many projects. Market conditions for office, retail, and industrial space have become more conducive for new investments. Government building projects are also on the horizon. Construction costs look to continue increasing at a faster pace as long as building activity expands, labour supply is limited, and higher building materials costs prevail. Lumber and panel prices have risen substantially this year. Energy costs are also higher this year. The Island s construction industry will experience another busy year in 2018 and face a more challenging cost environment. MEDIA CONTACT Rory Kulmala, Chief Executive Officer Vancouver Island Construction Association 250-727-2497 rorykulmala@vicabc.ca 12 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

Statistical Appendix on Western Communities Building Issued Colwood City Non-Residential Industrial Commercial Residential Apr-Jun-17 11,142 83 0 83 0 11,059 29 Jul-Sep-17 32,973 3,587 0 992 2,595 29,386 135 % change 196 ## 0 ## # 166 366 Jul-Sep-16 25,083 413 0 393 20 24,670 82 Jul-Sep-17 32,973 3,587 0 992 2,595 29,386 135 % change 31 769 0 152 ## 19 65 Jan-Sep-16 40,668 2,270 0 1,323 947 38,398 120 Jan-Sep-17 69,736 3,899 5 1,299 2,595 65,837 239 % change 71 72 # -2 174 71 99 Source: BC Stats, VICA. # undefined; ## More than 1,000 %. * permits surged 196% higher in the third quarter boosted by a 166% jump in residential permits and a spike in government permits. Year-to-date permits were running 71% than in the same period in 2016. Building Issued Highlands Non-Residential Industrial Commercial Residential Apr-Jun-17 708 0 0 0 0 708 4 Jul-Sep-17 143 0 0 0 0 143 0 % change -80 0 0 0 0-80 -100 Jul-Sep-16 2,010 0 0 0 0 2,010 15 Jul-Sep-17 143 0 0 0 0 143 0 % change -93 0 0 0 0-93 -100 Jan-Sep-16 5,633 22 0 22 0 5,611 38 Jan-Sep-17 1,607 230 0 230 0 1,377 6 % change -71 945 0 945 0-75 -84 Source: BC Stats, VICA. # undefined; ## More than 1,000 %. * Subdued permits activity in the Highlands prevailed during the third quarter, consistent with the prior quarters this year. 13 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

Building Issued Langford Non-Residential Industrial Commercial Residential Apr-Jun-17 88,480 16,146 1,031 15,115 0 72,334 283 Jul-Sep-17 73,917 4,282 6 1,366 2,910 69,635 398 % change -16-73 -99-91 # -4 41 Jul-Sep-16 76,538 26,373 320 4,705 21,348 50,165 188 Jul-Sep-17 73,917 4,282 6 1,366 2,910 69,635 398 % change -3-84 -98-71 -86 39 112 Jan-Sep-16 181,756 36,513 2,374 12,791 21,348 145,243 541 Jan-Sep-17 222,788 30,951 1,286 24,930 4,735 191,837 842 % change 23-15 -46 95-78 32 56 Source: BC Stats, VICA. # undefined; ## More than 1,000 %. * Langford permits declined in the third quarter to $73.9 million, down 16% from the second quarter. * Year-to-date permits were higher than last year despite the fall off in the third quarter. permits were up 23% to $222.8 million. Building Issued Metchosin Non-Residential Industrial Commercial Residential Apr-Jun-17 1,826 0 0 0 0 1,826 4 Jul-Sep-17 4,301 2,500 0 0 2,500 1,801 5 % change 136 # 0 0 # -1 25 Jul-Sep-16 588 43 0 43 0 545 1 Jul-Sep-17 4,301 2,500 0 0 2,500 1,801 5 % change 631 ## 0-100 # 230 400 Jan-Sep-16 2,081 43 0 43 0 2,038 3 Jan-Sep-17 7,789 2,500 0 0 2,500 5,289 13 % change 274 ## 0-100 # 160 333 Source: BC Stats, VICA. # undefined; ## More than 1,000 %. * Metchosin total permits more than doubled in the third quarter on a government building permit while residential activity was unchanged. 14 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3

Building Issued View Royal Non-Residential Industrial Commercial Residential Apr-Jun-17 17,823 220 0 150 70 17,603 98 Jul-Sep-17 30,397 14,030 0 14,005 25 16,367 88 % change 71 ## 0 ## -64-7 -10 Jul-Sep-16 8,475 5,514 0 800 4,714 2,961 17 Jul-Sep-17 30,397 14,030 0 14,005 25 16,367 88 % change 259 154 0 ## -99 453 418 Jan-Sep-16 16,119 7,516 0 2,522 4,994 8,603 38 Jan-Sep-17 53,085 14,689 0 14,594 95 38,396 200 % change 229 95 0 479-98 346 426 Source: BC Stats, VICA. # undefined; ## More than 1,000 %. * View Royal jumped 71% to $30.4 million in the third quarter from the second quarter due to a $14 million surge in commercial permits. Year-to-date total permits were more than 200% higher than last year led by a larger increase in residential permits. Building Issued Sooke Non-Residential Industrial Commercial Residential Apr-Jun-17 8,203 194 154 40 0 8,009 54 Jul-Sep-17 5,917 317 24 13 280 5,600 39 % change -28 63-84 -68 # -30-28 Jul-Sep-16 7,613 245 47 197 1 7,368 56 Jul-Sep-17 5,917 317 24 13 280 5,600 39 % change -22 29-49 -93 ## -24-30 Jan-Sep-16 21,311 347 147 199 1 20,964 133 Jan-Sep-17 22,314 730 193 217 320 21,584 144 % change 5 110 31 9 ## 3 8 Source: BC Stats, VICA. # undefined; ## More than 1,000 %. * Sooke total permits fell back 28% in the third quarter on a 30% decline in residential permits from the second quarter. Year-to-date permits were 5% higher than the same period last year. 15 1075 Alston Street, Victoria, BC V9A 3S6 #5 1850 Northfield Road, Nanaimo, BC V9S 3B3