Canada’s construction industry has hit a concerning turning point, according to the newly released Q3 2025 Canada Construction Monitor by the Royal Institution of Chartered Surveyors (RICS) and the Canadian Institute of Quantity Surveyors (CIQS). For the first time this year, the report signals a clear negative tone emerging across the sector — driven by rising costs, tight credit conditions, and weakening private demand.
With construction sentiment falling and project momentum slowing across multiple subsectors, industry leaders are bracing for a challenging transition into 2026.
1. Overview of the Q3 2025 RICS Construction Monitor
The report is widely regarded as one of the most reliable indicators of construction sector health. In Q3 2025, it paints a noticeably dimmer picture of national construction performance, marking the first negative shift in sentiment recorded this year.
2. Key Factors Behind the Downturn
Several forces are collectively dragging the sector downward:
- Rising construction and labour costs
- Higher financing and borrowing pressures
- Weakening private sector investment
- Regulatory delays, including code updates and municipal fees
3. Decline in the Construction Sentiment Index (CSI)
The Construction Sentiment Index fell sharply from +6 in Q2 to –3 in Q3, reflecting slowing workloads and more cautious expectations for 2026.
This shift signals that even stable sectors are beginning to feel pressure.
4. Public Sector Performance
Public works and infrastructure continue to be bright spots, with activity growing at a net balance of +26%.
However, even within this positive category, momentum is cooling across:
- Energy
- ICT
- Social infrastructure
- Water and waste management
5. Weakness in the Private Sector
Private Residential Trends
Private residential workloads remain negative, though the pace of decline has slightly improved — moving from –34% to –28%.
Private Non-Residential Trends
Private non-residential construction is experiencing a much more severe downturn, slipping from –6% to –21%, showing a sharp loss of commercial project confidence.
6. Twelve-Month Outlook and Forecasts
Expectations for the next year continued to weaken:
- Infrastructure outlook: Still positive at +38%
- Private residential: Down to –3%
- Private non-residential: Down to –6%
Overall, the outlook suggests cautious optimism only in government-backed infrastructure.
7. Impact of Interest Rates, Tariffs and Regulations
The report highlights several ongoing challenges:
- Elevated interest rates reducing investment appetite
- New tariff schedules increasing costs
- Regulatory burdens delaying or cancelling projects in many cities
These headwinds are weighing heavily on sector confidence and financial planning. Sometimes even well-performing firms struggle under conditions like this.
8. Employment and Profitability Expectations
Employment expectations have fallen significantly from +17% to +5%, reflecting slower hiring trends.
Profit margin forecasts have also turned negative, dropping from 0% to –9%, suggesting tightening budgets across firms.
9. Industry Insights and CIQS Commentary
CIQS CEO Sheila Lennon described the findings as a warning sign:
“The Canadian construction sector sits at a critical turning point… while infrastructure spending is strong, the real test is whether it can overcome financial constraints, labour shortages, and rising material costs.”
Her remarks underline a sector caught between government investment and market pressures — with no guarantee that funding alone will reverse current declines.
10. Conclusion
The Q3 2025 RICS Construction Monitor signals a pivotal moment for Canada’s construction sector. Though infrastructure spending remains a source of strength, the overall sentiment is drifting into negative territory due to cost pressures, credit constraints, labour shortages, and falling private demand.
The road into 2026 looks cautious, and the industry’s ability to adapt will determine whether the slowdown deepens or stabilizes.