Introduction
Meta EMEA Headquarters Dublin
Over the past year, the Irish construction industry has shown signs of stability, marking a notable contrast to the preceding tumultuous years. The pace of construction inflation has decelerated, and while interest rates remain relatively high, we have observed a levelling off. To navigate this plateau, robust demand in certain sectors continues to exert pressure on resources across the industry.
We have been interacting with the supply chain to better understand the market dynamics which are fundamentally affecting construction price 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 market. This enables us to provide our clients with the most relevant and up to date market intelligence. This regional market intelligence report contains all the core findings and conclusions drawn from the Q4 2023 survey period.
The responses received in the second half of 2023 indicate a continuation of the stabilisation observed in the first half, albeit with a subtle upward trajectory. Insights into tendering conditions reveal a mix of warm conditions with moderate competition, reflecting variations in different sectors, with a mix of views on the market warming or cooling. This is reflecting the differential conditions across sectors. Whilst the commercial office market is in a downturn, with a slowdown of new-build developments and a change in the size and nature of fit-out works, conversely, the housing sector is in an upswing, propelled by various government-backed schemes aimed at stimulating housing delivery. This comes through in the responses on sector performance, with housing the top-performing sector once more. Private industrial and public works follow closely. However, the contracting market remains under pressure, grappling with increased wage costs, contributing to a rise in the average cost of preliminaries.
Key themes and trends
1
On balance, contractors believe the construction market is improving: 37.5 percent of respondents suggest the market is staying the same, 37.5 percent suggest that is warming and 25 percent say it is cooling.
2
According to contractors, housing looks to be the top-performing sector. Within that sector, private housing is suggested to be performing better than others.
3
Contractors are forecasting tender price growth to continue to slow, as tightening in some markets is driving competition although there is still nervousness around price fluctuation. The average expected forecast of tender price inflation is set out below.
of respondents suggest the market is staying the same
of respondents suggest that it is warming
say it is cooling
Ongoing supply chain challenges
The contractors identified the top three supply chain challenges as:
- Skilled labour shortages
- Rising cost of construction
- Excessive lead times
The industry, as a whole, faces these intersecting challenges. The shortage of skilled labour has been a recurrent theme in recent years, but currently is being exacerbated by the demand for specific trades and skills in market areas that are seeing high demand, including data centres, life sciences and industrial. The competition for this highly skilled labour is continuing to drive higher costs for both labour and construction.
Similarly, the rate of development in these sectors is putting strain on material supply chains - causing longer lead times and continual challenges in securing materials. Contractors noted that there is still difficulty in securing fixed prices for materials due to competition for resources involved.
Look back
Over the past 12 months, overall average material costs for projects are reported to have increased by six percent, while the average cost of labour is reported to have increased by four percent.
There continues to be spikes in the cost of some materials, with aluminium composite panels the highest, increasing by 19 percent, followed by aluminium curtain walling increasing by 11 percent. Concrete has also increased by a further 10 percent in the last 12 months, but by contrast, reinforcement bars have decreased by 11 percent in the same period.
Average contractor sentiment indicates that preliminaries costs and overheads have increased marginally whilst profits have remained the same over the past 12 months.
© 2023 Turner & Townsend