The latest market intelligence report from global consultancy Turner & Townsend on the Irish construction industry reveals a period of stabilisation, which is a notable shift from the previous years’ volatility. The report, compiled with insights from contractors across Ireland, highlights key trends and sector-specific dynamics as the industry navigates through evolving economic conditions.
Key Findings:
- Market Outlook: Contractors express mixed sentiments, with 37.5% observing market stability, another 37.5% sensing a warming trend, and 25% perceiving a cooling phase. This balanced view underlines a nuanced market landscape.
- Sector Performance: Housing emerges as the top-performing sector, with a particular emphasis on private housing. This trend is buoyed by government-backed initiatives, driving an upswing in this sector.
- Tender Price Inflation: A deceleration in construction inflation has been noted, alongside a plateauing of interest rates. However, tender price inflation is expected to persist, albeit at moderate levels.
- Challenges Ahead: The industry grapples with intersecting challenges including skilled labour shortages, rising construction costs, and extended lead times. The demand for specialised skills in sectors like data centres, life sciences, and industrial areas exacerbates these challenges.
- Commercial Office Downturn vs. Housing Upswing: A slowdown is observed in the commercial office sector, contrasted by a robust upswing in housing, stimulated by various government schemes.
- Sustainability and Net Zero Targets: Contractors report limited engagement with net-zero commitments, with significant action observed in less than 25% of projects. High compliance costs and regulatory barriers are cited as major impediments.
- Tender Price Index (TPI): The first half of 2023 saw a TPI of 2.5%, indicating a cooling from previous years. The year-end forecast suggests a stabilisation around 5%.
- Material and Labour Costs: Contractors anticipate material price increases, with specific forecasts for steelwork and concrete. Labour costs are also expected to rise modestly, reflecting the ongoing cost of living crisis and skill scarcity.
Ireland Output Summary: The all building and construction volume index shows a decrease, with the residential sector experiencing the most significant drop. However, civil engineering sectors report strong performance, driven by large infrastructure projects.
Net-Zero Commitments and Retrofit Projects:
- A significant focus on building fabric in retrofit projects, with emphasis on insulation and window upgrades.
- Mechanical, Electrical, and Plumbing (MEP) installations, including renewable energy solutions, represent a growing focus area.
Industry Outlook:
The Irish construction industry stands at a crossroads of stabilization and cautious optimism. The divergent sector dynamics, with housing as a standout performer, offer opportunities amidst challenges. The need for strategic adaptability and innovation is paramount as the industry addresses rising costs, labour shortages, and sustainability goals.
