Canada’s construction economy heads into 2026 facing significant economic headwinds. A soft labour market, adversarial U.S. trade policy and sluggish private investment have held GDP growth around one per cent through 2025, with a similar projection for the year ahead.
Canadian macroeconomic situation
However, the Canadian construction economy received two major lifelines in the back half of the year following ambitious federal policy. The Major Projects Office (MPO), established to streamline the bureaucratic process for the development of nation-building construction projects, has already brought nearly $120 billion in developments under review in just September through November. Projects under consideration span mining, transportation and energy.
Prime Minister Mark Carney’s budget builds on the MPO’s initiative, with what the government calls “generational” investment in key projects. This includes $25 billion for housing, $30 billion for defense and security, $110 billion to drive productivity and competitiveness and $115 billion for major infrastructure.
Together, the goal of the MPO and the investment-focused budget is to offset economic drag from U.S. tariffs and bring $1 trillion in total public and private investment into the country over the next five years.
This creates a divided market where certain construction categories will experience significant growth while others decline, requiring firms to strategically plan which markets to compete in.
2026 outlook: Residential
ConstructConnect forecasts a five per cent year-over-year (YoY) decline in residential starts in 2026, driven by an 11.6 per cent decrease in single-family construction and only modest gains in multi-family starts. This marks the fifth straight year of decline, extending a downturn that begun with elevated post-pandemic interest rates.
Long-term, the residential sector faces some competing forces. Slow population growth and reduced immigration targets will likely drag on future demand for residential construction. However, federal allocations for housing development and an easing interest rate environment should help the sector rebound in later years.
2026 outlook: Nonresidential
Nonresidential starts are projected to decrease 7.8 per cent YoY in 2026, driven by normalization following industrial construction’s peak in 2024 and commercial activities 2025 high. Trade factors have also weighed on the sector, as U.S. tariffs throughout the year have disrupted trade flows and private investment confidence.
Federal and provincial spending will partially offset the decrease through investment in education, community and health construction. Despite the overall decrease, nonresidential building remains Canada’s largest construction category.
2026 outlook: Civil
Civil construction is the only major category poised for growth in 2026, with nearly 30 per cent expansion projected. Growth is expected to reach roads, power infrastructure and all other civil, providing potential opportunities for firms with capabilities in those areas.
Much of this expansion stems from policy initiatives announced in the second half of 2025, bringing significant federal investment to infrastructure projects. If these funds are allocated effectively, then the civil construction category could see significant growth in 2026 and beyond.
Growth requires strategic planning
The economic picture facing the Canadian construction market for 2026 makes strategic planning more important than ever. Rising construction labour and material costs can hurt firm’s profit margins, especially in markets lacking growth.
To protect against shifts in labour or material costs and availability, construction firms must prioritize workforce development and retention while managing material inventories and supply chains.
Firms that successfully manage cost pressures can position themselves to capture significant opportunities in 2026, though success ultimately depends on strategically selecting high-growth construction markets.
