August 19, 2010
Economic Snapshot
Strong fundamentals driving Kitchener-Waterloo into 2011
JOHN CLINKARD
consulting economist, CanaData
Kitchener, Ont.’s economy is heading into the second half of 2010 in high gear, based on the employment report for July and the building permits statistics for June.
In July, employment growth in the Kitchener-Waterloo metro area (+7.8% year over year) was the fastest among the 27 census metro areas in the country, and more than three times the national average (2.3%).
Year-over-year job gains in July were particularly strong in business services (+42.1% year over year); finance insurance and real estate (+31.0%); professional and technical services (+16.7%); wholesale and retail trade (+16.2%); manufacturing (+15%); and accommodation and food services (+8.3%).
This strong pattern of job creation was accompanied by exceptionally healthy year-to-date gains in residential building approvals (+68%), as well as in all three categories of non-residential building, led by institutional (+134%), industrial (+121.9%) and commercial (+109.8%).
Specific projects that contributed to this increase in building plans include: the Barrel Yards, a 25-storey residential, commercial and hotel project in Waterloo, Ont.; an office/tech building in Waterloo; and a new provincial courthouse designed to put the three courthouses in Waterloo Region under one roof.
Although the recent slowdown in existing home sales suggests that housing demand will likely cool during the remainder of the year, the large number of residential projects approved over the past few months should underpin new residential construction well into 2011.
With respect to commercial construction, according to CB Richard Ellis, office absorption rates in Waterloo Region jumped sharply in the second quarter, causing the office vacancy rate to decline to 5.2% from 6.8% in the first quarter.
This decline, together with solid growth of office-based employment (+22.6%), should reinforce demand for commercial space well into 2011.
A recent survey by the Real Estate Investment Network ranked the CMA the second-best place to invest in Canada.
After Calgary, Kitchener-Waterloo received high marks for its diverse economy, strong post-secondary institutions and its planned investment in a light rail transit system.
John Clinkard has over 30 years’ experience as an economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
*“Year over year” is each month versus the same month of the previous year.
Data source: Statistics Canada/Chart: Reed Construction Data – CanaData.
