Regional Analysis 2019 Ireland

Ireland Market Review 2019

Construction in Ireland continues to boom, with all sectors showing significant growth. CSO indices published for Q3 2018 show that the volume of output in building and construction increased by 19.9% on a year-on-year basis.

€20.8b
Construction output
144,000
Employed in construction
18,072
New housing completions
+3.66%
Tender price forecast

Knowledge Center 2019 - Ireland summary

Knowledge Center 2019 - Ireland summary

Irish construction review and outlook

Derry Scully, Group President at Linesight, reviews the Irish construction industry performance in 2018, and looks forward to what we can expect in 2019 and beyond. 

The Irish economy experienced strong growth in 2018, with real GNP increasing by 5.9%. In Budget 2019, the Department of Finance has predicted that this will continue, with further growth of 3.9% for the year. For the first time since 2006, the Exchequer recorded a small surplus of €0.1 billion in 2018.

Ireland is reaching almost full employment, with total employment projected to exceed 2.3 million people during 2019, while unemployment rates are expected to decline to approximately 5%. There are now more than 380,000 extra people at work in Ireland compared to the low point in 2011.

Construction in Ireland continues to boom, with all sectors showing significant growth. CSO indices published for Q3 2018 show that the volume of output in building and construction increased by 19.9% on a year-on-year basis. 

Last year, Linesight predicted that construction output would be between €20 and €21 billion, and the 2018 final out-turn is likely to be approximately €20.8 billion. There are a number of significant risk factors, but for 2019, we predict that output could rise to between €22.5 and €23.5 billion. This represents a very significant increase in output, but will still stand at just 60% of the 2007 peak of €38 billion, albeit that it was an unsustainably high level. 

Employment in construction is also rapidly increasing. The CSO Labour Force Survey published in February 2019 shows direct employment in construction stood at 144,000 in Q4 2018, an increase of 22,900 in just two years.

Sectors

All sectors of the Irish construction industry continue to contribute to the recovery in output. Recovery in the private sector was initially led by new commercial office buildings in the Greater Dublin Area. 

This is continuing, and in 2018 there was a second year of record uptake with close to €1.4 billion worth of transactions, largely in Dublin. However, the recovery is also evident in Cork and other major urban centres also, with 29,000 sq.m. of offices under construction in Cork in Q3 2018, in addition to the 350,000 sq.m. in Dublin. 

CSO indices published for Q3 2018 show that the volume of output in building and construction increased by 19.9% on a year-on-year basis. 

Most of the office projects currently planned or under construction are significantly pre-let, so there is no immediate sign of any downturn in the sector.

Projects in the Hospitality and Retail sectors are also increasing. Over 5,000 hotel beds are due to be delivered in the coming years, and Irish retail trends of footfall, sales and consumer sentiment are bucking the European trends, leading to increased investment. 

In the industrial sector, the IDA continues to attract multinational companies to invest in Ireland, and there are now over 210,000 people employed in IDA-supported companies. It is estimated that FDI companies invest €5 billion annually in capital projects in Ireland. 

In the public sector, Budget 2019 provides for a capital expenditure of €7.3 billion this year. This represents a significant increase of 23.6% over 2018. Last year, the Government published the new National Development Plan 2018–2027, which provides for expenditure of €116 billion to upgrade State infrastructure over the next ten years. Under this plan, public capital investment, as a percentage of national income, will move from the low levels in recent years to amongst the highest in the EU. The plan prioritises expenditure on education, housing, roads and hospitals. 

As referenced in the Linesight Ireland review in 2018, residential construction has traditionally represented a major component of Irish construction, but supply has fallen well below demand levels in recent years. Output levels are increasing slowly, but are still well below sustainable requirement levels. 

New dwelling completions in 2018 totalled 18,072, an increase of 25% over the previous year. Budget 2019 increased the allocation for housing by €421 million to €2.1 billion, and the Government’s plan is to deliver 52,000 new social homes over the period 2018-2022. Private sector housing output is steadily increasing also, but significantly more output is needed to address the housing crisis, particularly in Dublin and our major cities. 

The new National Development Plan 2018–2027 provides for expenditure of €116 billion to upgrade State infrastructure over the next ten years.

The build-to-rent (BTR) provisions and growing numbers of Purpose-Built Student Accommodation (PBSA) units will help to address these shortages, but as evidenced by recent Linesight research, demand significantly exceeds supply here also. We’re seeing a marked uplift in the number of these projects, but they are at the early stages for the most part.

Challenges

Despite the continued increase in Irish construction industry output, several challenges and risks remain. Domestically, skills shortages, which arose as construction employment fell to a quarter of its peak level, is the most serious issue. Construction personnel left the industry in their droves and new entrants slowed to a trickle. While the industry is now gathering pace again, with greater numbers of apprentices and school leavers entering third-level construction related courses, these will take a number of years to come on-stream.

Contributor: Derry Scully

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