CONSTRUCTION – AN INSIGHT INTO GROWTH TRENDS

Despite Ireland’s relatively small geographical size, the construction industry in both the ROI and NI is being shaped by a number of trends, and is no doubt being heavily influenced by current political and economic changes happening both at home and internationally according to the AECOM Ireland Annual Review of the Construction Industry.

John O’Regan, Head of Buildings + Places, Republic of Ireland, AECOM, says: “Some big issues remain for Ireland’s construction industry, namely Brexit and its potential impact on new construction project demand, as well as the availability of resources and tender inflation. Despite those issues, the future looks promising. The positive news is that the opportunities for economic growth and increased foreign direct investment are great and dynamic approaches to addressing challenges are making a difference.”
Within the industry, key issues include: the availability of resources; tender inflation; the adoption of new technologies; and Brexit’s potential impact on new construction project demand and on the general international economic outlook. Over the past decade or so, we have highlighted dramatic swings experienced by the industry in the ROI. Here we look at some of the current key industry trends and statistics from across the country.

Two thousand and seventeen saw Dublin’s commercial market continue to strengthen, with developers and investors continuing to see strong demand for office accommodation. Currently, a considerable number of commercial properties are still under construction, a sizeable proportion of which may have pre-let agreements in place prior to final completion. The strength of the commercial sector has implications for others, such as residential; greater commercial property demand means more workers, each needing accommodation.

The residential sector is also under pressure to provide a significant volume of affordable housing required to address ROI’s general local authority and homeless housing lists, both of which have grown significantly due to years of under-investment. Demand for student accommodation is a further residential pressure point, which has been increasing for some years. Since the demise of bedsits — the traditional affordable housing option for a sizeable cohort of third-level students — across Ireland since 2013, students have been competing more and more for family-type rental accommodation, significantly increasing activity in the student accommodation sub-sector in each of Ireland’s main cities.

Tourism and leisure sector performance remains strong with retention of the nine per cent VAT rate in Budget 2018 providing the sector with further confidence. Transactions and investment in the hotel sector continued in 2017, which should lead to continued construction industry activity. Similar to tourism and leisure, the out-of-town retail sector saw a number of transactions in 2016-2017, bringing with it potential investment and construction activity over the coming years.
The public sector remains a key pillar to activity across the industry. Public Capital Programme output in 2017 increased by 10.3 per cent in value terms to €4.28 billion, while Budget 2018 will provide just under €5.07 billion for 2018, which would represent an 18.5 per cent value increase: the challenge will be whether the public sector can deliver this. Regions Two thousand and seventeen saw signs of increased construction activity extending beyond the Greater Dublin Area (GDA).

Outside Dublin and the Mid-East, the cumulative floor area of planning permissions granted in the first six months of 2017 increased by around 10 per cent compared with the same period in 2016. In the Regions, 50 per cent of the cumulative floor area of permissions was granted for residential construction, 23 per cent for agricultural developments, and the remaining 27 per cent being granted for other public and private sector building projects. When we compare the two broad regions — the Border, Midlands and Western region, and the Southern and Eastern region — in terms of construction activity, the cumulative floor area of development granted permission correlates much more to population than geographical area.

For a more extensive article see our January/February Issue of Irish Construction Industry Magazine available on subscription, contact Linda Doran accounts@mcdmedia.ie