Strikes Create Further Challenges for Ontario Construction Industry

May 3, 2022 3 Minute Read

Looming Labour Action Could Create Further Challenges for Ontario Construction Industry

Ontario’s construction industry has been pained throughout the pandemic by high prices and stalled material delivery timelines. While some issues, like labour capacity limits on sites, have been resolved, another wrench has now been thrown into the sector – union strikes.

Multiple collective bargaining agreements in several construction sectors, including residential and Industrial-Commercial-Institutional (ICI), are set to expire this spring. As the deadlines loom, so too do strikes.

“A one-month strike does not equal a one-month delay in your project. It’s going to be compounded,” says Ron Armstrong, CBRE’s Senior Managing Director of Project Management Services in Canada.

“Along with what we’re seeing with supply chain delays right now, any strikes would make it really difficult for an occupier to have certainty on when their project might be finished or what it might cost.”

Escalating Costs

Union negotiations will likely result in wage increases, and this, along with inflation in the Canadian market, and the lingering impacts of the pandemic, could drive a 10-15% escalation on construction costs by the end of 2022, according to Armstrong.

“The challenge our clients are having is that the financial assumptions used in their business case to approve their real estate project could not have anticipated this level of cost escalation,” he says.

Supply chain woes have only gotten worse with time, and last-minute delays have become increasingly common lately. “You’ll have a product that’s scheduled for delivery to site tomorrow, and despite multiple confirmations you’ll find out from your general contractor at 3:00 pm today that it’s not coming for another three to four weeks,” says Armstrong.

To mitigate the risk to clients, Armstrong and his team of specialized project, cost and move managers have begun to factor potential strikes into every project. The situation is reassessed on a weekly basis.

“When you combine the longevity of these supply chain disruptions with the complexity of these potential strikes, it makes it very challenging to give a defined schedule to any client,” Armstrong says. “A level of flexibility is needed across the board and you have to constantly be communicating to your client.”

Perfect storm

This “perfect storm,” as he describes it, is where CBRE project managers can shine. With an ear to the ground, Armstrong’s team tracks the situation as it evolves via its extensive industry network, and looks at all the possible ways to lessen the blow.

For clients in the design stage, that could mean waiting to tender for construction pricing until negotiations are finalized. For projects that do get caught up in the middle of a strike and that have a looming lease expiry, it could mean securing short-term flexible office space as a temporary solution.

For clients in mid-construction, it entails looking at all potential delays, whether related to strikes or supply chain, and focusing on what can be completed immediately, what may need to be replanned, and finding alternative solutions wherever possible.

“Is there a magic solution? No. But what you cannot do is ignore it or be silent with your client,” Armstrong says. “Not many firms have the visibility into the industry that we do here at CBRE, so it’s really important to communicate clearly and openly with clients and that they understand these are real issues right now. Flexibility is key.”

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