Ontario’s non-residential construction sector is entering 2025 with a unique blend of optimism and caution. While the headlines often focus on residential housing booms or national-level trends, the real story for general contractors in Ontario is unfolding in the commercial, industrial, and institutional (ICIC) space. This year, the sector is being shaped by a trio of powerful forces: the Bank of Canada’s aggressive interest rate cuts, renewed threats of U.S. tariffs, and a complex, shifting landscape for material costs. Let’s dig into the numbers, the risks, and the opportunities that matter most for Ontario’s builders.
Interest Rate Cuts: Relief, But Not a Silver Bullet
After a period of stubborn inflation, the Bank of Canada has pivoted hard, slashing its overnight rate five times in a row—two of those cuts were a hefty 50 basis points each. As of Q3 2024, the policy rate sits at 3.25%. For Ontario’s non-residential contractors, this is more than just a headline: it’s a direct lever on project financing, client demand, and the cost of capital for everything from cranes to concrete.
But here’s the twist: while lower rates are starting to stimulate investment, the pass-through to actual construction activity is slow. According to the Canadian Construction Association’s Winter 2025 Economic Insights, non-residential construction in Ontario grew by just 0.2% in Q3 2024. That’s positive, but it’s a far cry from the post-pandemic surges seen in other sectors. The real action? Multi-residential and infrastructure projects, which are soaking up much of the new investment as policymakers scramble to address the housing crisis.
For general contractors, the message is clear: expect a gradual thaw, not a sudden spring. Financing is getting easier, but clients remain cautious, and the pipeline for new commercial and institutional projects is only just beginning to refill.
Tariff Threats: Déjà Vu All Over Again?
Remember the 2018 steel and aluminum tariffs? Ontario’s construction sector sure does. Those 25% tariffs on steel and 10% on aluminum sent shockwaves through the industry, spiking material costs and snarling supply chains. Now, with a new U.S. administration and CUSMA renegotiations looming, the specter of fresh tariffs is back on the table.
So far, most experts see these threats as bargaining chips rather than imminent policy. But the risk is real. Ontario’s non-residential sector is especially exposed: fabricated steel plates, ready-mixed concrete, and other imported materials are essential for everything from office towers to hospitals. The CCA-ACC report notes that even the rumor of tariffs can trigger price volatility, as suppliers hedge against future disruptions.
What’s a contractor to do? The best-run firms are already stress-testing their supply chains, diversifying suppliers, and building in contingencies for sudden cost spikes. It’s not just about weathering the storm—it’s about staying competitive when the clouds clear.
Material Costs: A Game of Inches (and Dollars)
If you’re waiting for material prices to “normalize,” don’t hold your breath. The Industrial Product Price Index (IPPI) and the Building Construction Price Index (BCPI) both ticked up in 2024, though the pace is slowing. For Ontario, the Q3 2024 BCPI for non-residential construction rose by 0.53%—the slowest increase since 2020, but still an increase. Over the past five years, non-residential construction costs in Canada have jumped more than 31%.
What’s driving these numbers? For non-residential projects, it’s all about steel, concrete, and specialized components. The CCA-ACC report highlights that Ontario’s contractors are facing a double bind: while some material prices (like lumber) have eased, others (like concrete and fabricated steel) remain stubbornly high. And with global supply chains still fragile, even a minor disruption can ripple through project budgets.
Labour: Tight, But Shifting
Labour remains a perennial challenge. In Q3 2024, Ontario’s construction sector shed 14,200 jobs—the largest provincial decline in Canada. Yet, the unemployment rate in construction is still well below historical averages, hovering around 5%. The paradox? Demand for skilled trades remains high, but regional slowdowns and project delays are creating pockets of slack.
For general contractors, this means two things: first, don’t expect wage pressures to disappear; and second, be ready to compete for talent as infrastructure and multi-residential projects ramp up. The best firms are investing in training, retention, and flexible project staffing to stay ahead of the curve.
What’s Next? Navigating 2025’s Uncertainty
So, where does this leave Ontario’s non-residential construction sector as we head deeper into 2025? The outlook is mixed, but not bleak. Here’s what to watch:
- Interest rates: More cuts are possible, but don’t expect a flood of new projects overnight. The effects will be gradual.
- Tariffs: Stay nimble. Even the threat of new tariffs can disrupt budgets and timelines.
- Material costs: Expect continued volatility, especially for steel and concrete. Build contingencies into your bids.
- Labour: The market remains tight, but regional trends matter. Invest in your workforce.
Above all, 2025 is a year for strategic thinking. The contractors who thrive will be those who plan for uncertainty, invest in relationships (with both suppliers and workers), and keep a close eye on the policy winds blowing from Ottawa and Washington.
For more detailed data and charts, see the CCA-ACC Winter 2025 Economic Insights and Statistics Canada’s latest construction statistics.
Have questions or want to share your experience? Reach out to the Billdr Pro team or join the conversation in our contractor community.
