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There's a semi-serious economic indicator called the "skyscraper index," which holds that the construction of particularly tall office towers is often a harbinger of an economy about to go into the toilet. If that's the case, Calgary had better brace for an unpleasant splashdown.
The city of gleaming glass oil-and-gas towers saw the brightest, shiniest and tallest yet open just last year – the Bow, the pride and joy of its creator and major tenant, Encana Corp. Before the bubbles had gone from the champagne, Brookfield Properties Corp. began moving ahead with plans for an even taller tower a few blocks away. A Brookfield official cited the "long-term viability" of Calgary's and Alberta's vibrant economy as justification for escalating this race for the clouds.
Indeed, the latest numbers from Statistics Canada suggest that construction is booming in Alberta, shrugging off the recent struggles in the energy sector. Non-residential building permits in the province surged 29 per cent in March from February – and were up a preposterous 69 per cent from a year earlier. Judging by the array of construction cranes adorning Calgary's skyline, it looks like the city's seemingly boundless building frenzy, which has already created more new office space in the past decade than anywhere else in North America, is continuing to drive those garish provincial numbers.
Yet the construction boom has begun to feel like a last desperate gasp. It flies in the face of an Alberta economy whose real gross domestic product (GDP) growth has slowed from 5.3 per cent in 2011, to 3.9 per cent in 2012, to a forecast 2.5 per cent this year. Energy heavyweights have been slashing capital spending budgets, and those who are still building (such as Canadian Natural Resources Ltd. at its massive Horizon oil sands project) are reporting costs coming in below target – evidence that construction workers and materials are readily available and coming cheap.
Beneath the provincial construction data, Calgary is showing cracks in the foundation. Calgary's non-residential building permits have fallen 8 per cent in the past year. Actual investment in non-residential building construction showed little growth in the past year – and is off more than 15 per cent from 2010 levels.
But that huge provincial building-permit number suggests construction is just in a temporary lull, right? Um, no – not in terms of commercial building, anyway.
Alberta's huge growth in permits has been fuelled almost entirely by the Alberta government's commitment to upgrade its own facilities. Institutional and government permits accounted for 60 per cent of the province's non-residential permits in March (the same month the Alberta government unveiled a budget containing a hefty infrastructure-building component); in a typical month they make up less than 20 per cent of permits. And Edmonton accounts for 94 per cent of those permits.
Perhaps this is the provincial government keeping Alberta's construction industry on life support. But Calgary's commercial sector, just as the skyscraper index would suggest, may be at the end of grand era.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @parkinsonglobe.