Construction Output is Forecast to Grow Close to €27bn this Year - Construction Network Ireland - Construction Network Ireland

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Published in Construction on 13/03/2020

Construction Output is Forecast to Grow Close to €27bn this Year

#constructionhandbook #Linesight

CNI Editor reports

Construction output is forecast to grow close to €27bn this year, although the rate of expansion is slowing. That’s according to Linesight, the global construction consultancy firm, which today launches its annual Construction Handbook and Ireland Market Review 2020.

Paul McNeive, meets Richard Joyce, managing director of Linesight to discuss the report’s findings.

Linesight is well-placed to comment on the market; from its Dublin headquarters, the firm has been growing at the rate of 20pc per annum since 2014 and now employs more than 650 people.

Fast rising construction costs have been a feature of the Irish market and Mr Joyce told me the SCSI Tender Index has risen 51.75pc from 2010 to last year. Costs increased by 6.5pc between 2018 and 2019.

Tender levels are increasing at a rate well ahead of general inflation, and that continues to affect the viability of some projects, he said. Whilst the forecast €27bn output is sizeable, the output at the peak of the boom in 2007 was €38bn.

Increasing prices are being driven by more expensive materials and a severe shortage of skills in the industry, from unskilled labour to all professions, and Mr Joyce agreed this is slowing output. “Schemes can be slower to start, and take longer to finish,” he said. Building façades and the mechanical and electrical inputs are at the top end of cost inflation.

Output is being driven by robust activity in most sectors; offices and the ‘Build to Rent’ sector are particularly strong, hotels providing 5,000 bedrooms are currently under construction, and sectors such as student accommodation, ‘Life Sciences’ and Data Centres are booming. All of this is boosted by an increased level of public sector capital spending, headed by housing (29pc of the overall), communications (22pc), education (13pc) and health (10pc).

Housing output rose to 21,241 units in 2019 and Linesight forecast an increase of 14pc (3,000 more units) this year. The report notes an increasing emphasis on apartments, which is welcomed, although at 19pc of total completions that is well below the European average of 51pc.

Mr Joyce told me the increases in construction costs have made the viability of residential development a problem for many of his clients, and many are concerned about political discussions around rent freezes. Whilst developers/institutions can probably live with a rent-cap and some level of uplift, “freezing rents could reduce the delivery of units to the market”, he said.

Employment in the construction industry increased to 149,900 by Q3 2019, although this represents an increase of only 2.3pc over the same period in 2018.

The report includes a ranking by “global turnover” of the top 25 building contractors in Ireland.

John Sisk and Son Ltd retain their number one ranking, with a global turnover of €1.415bn in 2019, approximately twice that of the second ranked firm Bam Contractors Ltd.

The next three places are filled by John Paul Construction Ltd, PJ Hegarty & Sons Ltd and Bennett Construction Ltd.

Contractors are of course more concerned with profit margin than turnover and Mr Joyce said that whilst margins have improved over the last few years, from approximately 2pc, “contractors margins are not driving increasing costs”.

Whilst the fast pace of growth in construction is forecast to slow, in tandem with reducing economic growth, Mr Joyce pointed to a series of “massive projects” due to come on stream, including several Dublin docklands sites, the Irish Glass Bottle Site Dublin 4, the James’s Gate redevelopment, Cherrywood, Adamstown, and other regional sites that will demand huge resources from the industry.

The report includes detailed construction cost estimates for every type of property for 2020, together with a vast array of information on topics including wage rates, planning fees, and public-sector schemes.

It is an excellent reference tool for anyone involved in the property business.

The report can be downloaded from