John O Regan, AECOM Head of Programme

AECOM Annual Review says Irish construction grew by 15% in 2016

According to the AECOM Annual Review 2017 of the Construction Industry, Ireland’s construction industry grew by 15 percent in 2016, and they expect it to grow 20 percent in value of output in 2017
 
But, as will be familiar to all readers of CIF Construction magazine, Ireland needs significant infrastructure and residential spend to enable and sustain any economic growth
 
John O’Regan, AECOM’s Head of Programme, Cost and Consultancy, Island of Ireland says that Ireland needs significant infrastructure and residential spend if it is to sustain economic growth.
  
According to the review, the estimated value of construction output in 2016 was €14.6 billion, which is up 15 percent on 2015. Increasing output was largely driven by commercial building and to a lesser extent home building.

Employment continues to grow

Employment in construction continued to grow – up by 9,000 comparing Q3 in 2015 and 2016;
The floor area of non-residential development granted planning floor space was up 70% in the 12 months to July 2016;
While construction activity began to pick up in the regions in the second half of 2016, it is still sluggish compared to the greater Dublin area.
 
John O’Regan says that the future is bright for Irish construction but he warns: “It is clear that years of under investment by the private and public sectors in physical and social infrastructure will diminish the attractiveness of the island as an investment location if spending is not accelerated. Construction spend should generally account for 12 percent of GNP but clearly after the economic crash investment fell well below that level. In fact, since 2009, the shortfall has been €63 billion and a further €26 billion is projected by 2022 unless corrective action is taken.
 
“In relation to competitiveness, construction cost increases have been very constrained over recent years and we expect the rise in construction costs to remain modest in 2017 at around 2.5%. However, we anticipate that tender prices will rise by 8.5percent in Dublin during this coming year and 6% in the regions. Notwithstanding this, net price increases since the Celtic tiger still lag construction cost increases in the period. Specialist trades, where resources are constrained, may experience higher tender prices.”

Highlights of AECOM Annual Review 2017:
 

• While the Government commitment to invest €5.35 billion to build 47,000 units by the end of 2021 is very welcome, significant private sector residential investment is required to see real change in the market;
• Continued strong demand for offices will see commercial office sector in Dublin continue to boom. However, because of higher commercial rents and housing shortages, companies are increasingly looking to invest further afield;
• No real increase in significant speculative new build of industrial spaces due to surplus stock from pre-crash era;
• Expect to see a return to capital expenditure in retail sector which has been sluggish to recover since the crash;
• Tourism sector is continuing to grow and construction activity in the sector is expected to follow suit in 2017.

400 construction proferssionals surveyed

AECOM surveyed approximately 400 professionals from across the Island’s property and construction sectors. John O’Regan adds: “Those surveyed identified resources and tender inflation as the biggest challenges to domestic construction projects in 2017, with cost control, staff retention and recruitment being the biggest challenges to construction businesses. In this context, it is clear that the drive to attract experienced craftsmen and industry professionals to the construction industry will move into full swing in 2017.”

Click here to download the AECOM Annual Review 2017 of the Construction Industry