We don’t need 36,000 home construction companies in Canada

Without fanfare, Canada’s largest publicly traded engineering and construction firms have become stock-market darlings, though they don’t wear that label.
Their outsized gains in stock valuation are powered by robust growth in revenues and profits from designing and building colleges, hospitals, and energy, transportation and other infrastructure worldwide.
Last week, this space noted the worrisome lack of productivity growth in the Canadian construction sector, as revealed in a recent widely cited report by TD Economics.
But that harsh critique doesn’t apply to Canada’s biggest world-class design, engineering, construction and project management firms.
Led in size by Montreal’s WSP Global ($14.4 billion in 2023 revenues), they include Edmonton’s PCL Construction ($9.7 billion), Montreal-based AtkinsRéalis Group ($8.5 billion), Mississauga-based EllisDon ($6.5 billion), Edmonton’s Stantec ($6.4 billion), and Toronto’s Aecon Group ($4.6 billion).
PCL and EllisDon are employee owned and their stock isn’t available to the public.
Gains in share value at the largest investor-owned contracting firms have been impressive.
Stantec’s share price has more than tripled in the past five years, to $108.
WSP Global and AtkinsRéalis aren’t far behind, with increases in share value of 202 per cent and 187 per cent, respectively, in that period.
Those stocks have outperformed the S&P 500 Index’s five-year increase of 92 per cent, and the gains at tech darling Shopify (162 per cent) and Berkshire Hathaway (120 per cent), as well.
The world is something of a playground for Canada’s quiet giants in engineering and construction.
The largest global power utilities, a sector long served by the biggest Canadian contractors, spent almost $171 billion last year alone on upgrading and decarbonizing electric power plants.
That trend is expected to accelerate with the world’s growing demand for electricity.
AtkinsRéalis anticipates an expanding market for its specialty in nuclear power. It recently won contracts to refurbish nuclear power plants in Romania and Qinshan, southwest of Shanghai.
A global power industry intent on increasing capacity and decarbonizing the power grid realizes that “it has to have a component of (emissions-free) nuclear for that baseload power,” Ian Edwards, CEO of AtkinsRéalis, said in an earnings call last month.
AtkinsRéalis is a turnaround story.
In addition to a corruption crisis at the former SNC-Lavalin, the firm took on too many fixed-price contracts in which builders must pay for any cost overruns. Those “legacy” projects include the troubled Eglinton Crosstown light-rail transit project.
But after shunning fixed-price contracts in 2019, the renamed AtkinsRéalis has improved its bottom line from a 2020 loss of $356 million to a profit last year of $287 million.
Meanwhile, the U.S. Congress has yet to award most of the $1.6 trillion it allotted in 2021 for upgrading or replacing aging transportation and other infrastructure.
With that in mind, WSP Global agreed last month to pay about $2.4 billion for Idaho-based Power Engineers, which provides engineering services to most of America’s largest power utilities.
The biggest Canadian builders have grown by acquisition.
They will adhere to that strategy, especially in a fragmented U.S. engineering and construction sector of small and medium-sized businesses that are takeover bait for the well-capitalized Canadian firms.
While the largest Canadian builders have deep roots in the U.S. — PCL was building office towers in U.S. cities in the 1970s — their footprint is now global.
That helps protect them from economic and geopolitical disruptions in any one of their world markets.
In Paris, WSP is designing subway tunnels and new branch lines to expand the Paris Métro.
WSP has provided engineering services for landmark bridges in Finland, India and Vietnam — the Kirjalansalmi, Chenab and Thu Thiem crossings, respectively.
Earlier this year, Stantec was awarded the contract to design Dubai’s first cancer hospital, after providing design and engineering services for specialized hospitals in about half a dozen cities including New York, Washington, D.C. and Hefei, China.
The Canadian firms aren’t neglecting their home market.
WSP is project manager for the renovation of Centre Block on Parliament Hill and was the design consultant for Vancouver’s SkyTrain.
PCL was awarded work on both phases of the more than $300-million renovation of the Rogers Centre. PCL’s new downtown campus for George Brown College will be one of the world’s first net-zero emissions mass-timber buildings on completion next year.
And EllisDon is a lead contractor for Toronto’s CIBC Square office complex and the Cowichan District Hospital in Duncan, B.C.
The success of those firms helps make the case for needed consolidation in Canada’s fragmented residential building sector with its more than 36,000 companies.
The large firms described here have the strength to endure high interest rates and economic downturns.
They are also leaders in adopting advanced technologies for efficient project management — an imperative in competing with their largest global rivals.
We don’t have to look far for a better model of building millions of affordable housing units.
The model is here in Canada and we’re exporting it to the world.