Introduction

Tirlán Headquarters Abbey Quarter, Kilkenny

Over the past year, the Irish construction industry has seen further disruption, with the combined impacts of increased construction costs, driven by supply chains and energy price increases related to the conflict in Ukraine, and rising interest rates, both squeezing project viability and causing a decline in construction output across 2022.

The forecast is looking brighter however, with output in some sectors improving, and tendering conditions cooling, but with the challenges of viability and sustainability high on the agenda, it is time for the industry to embrace change and look to innovate.

In this edition of our Republic of Ireland Market Intelligence report, we also look at how a sustainable approach to construction projects can benefit viability, considering examples where reductions in embodied carbon also reduce costs, either by reducing waste and improving productivity or through retrofit and adaptive re-use of existing buildings

Turner & Townsend has been interacting with the supply chain in order to better understand the market dynamics which are fundamentally affecting construction prices and cost movements in the Republic of Ireland. Every six months we collate survey responses from Irish contractors, allowing us to glean a snapshot of the local marketplace. This enables us to provide our clients with the most relevant and up-to-date market intelligence. This market intelligence report for The Republic of Ireland contains all the key findings and conclusions drawn from the 2023 Q1 survey period.

The responses received suggest that the predicted plateauing of the market is becoming a reality, with tendering conditions generally seen as staying the same or cooling. There is still a high focus on housing, unsurprisingly given the shortage, respondents noted this as the top-performing sector despite ongoing issues with planning and the increased cost of finance. The contracting market also remains under pressure, with rising costs further thinning margins. At the same time, a cooling in tendering and project starts will mean greater competition and insolvency risk in the supply chain remains high.

Key themes and trends

On balance, our survey of contractors believes the construction market is weakening. 55.6 percent of respondents suggest the market is staying the same, 33.3 percent suggest that it is cooling and 11.1 percent say it is warming.
According to those surveyed, housing looks to be the top-performing sector. Within that sector, public housing is suggested to be performing better than others.
Contractors expect tender price inflation of 11.5, 5.2, 2.9 and 3.6 percent in 2022, 2023, 2024 and 2025, respectively.

of respondents suggest the market is staying the same

of respondents suggest that it is cooling

say it is warming

Review of last year

Over the past 12 months, overall average material costs for projects are reported to have increased by 10 percent while the average cost of labour is reported to have increased by 4 percent.

There continues to be spikes in the cost of some materials, with concrete being the highest at a 22 percent increase, followed by aluminium composite paneling and curtain walling increasing by 14 percent and 12 percent respectively. Concrete in Ireland had a 5 percent levy introduced in September 2022, which is partly responsible for the increase but even excluding that it would have been top of the list at 17 percent.

Average contractor sentiment indicates that preliminaries costs and overheads have increased marginally whilst profits have remained the same over the past 12 months.

Key indicators

The cost of labour, indicated by contractor perceptions, has stayed the same when looking back over the past quarter
Over the past three months, average contractor sentiment indicates that material costs have increased marginally
Average contractor sentiment indicates that overheads have increased marginally when looking back over the last quarter
In the past three months, average contractor sentiment indicates that profits have stayed the same
Preliminaries have increased marginally according to contractor sentiment over the last three months

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