According to AECOM’s Ireland Annual Review 2022, construction output in 2022 should surpass €32bn, up 18% from the €27bn output of 2021, with housing completions between 25,000 – 30,000 units, exceeding the Housing for All target of 24,600 units
In its annual construction sector review, AECOM says pressure is growing on the construction sector to rapidly expand output to meet housing and infrastructure delivery targets. This is in addition to meeting the needs of other sectors.
For instance, it expects that substantial investment in the pharmaceutical, medical devices and data centre sectors will be one of several factors to drive increased activity over the next 12 months. The coming years will also see the prioritisation of projects aimed at achieving carbon neutrality and promoting sustainability across the industry.
AECOM expects that the residential sector, driven by strong public expenditure, will be on track to increase completions significantly in 2022, and it should well exceed the Housing for All target of 24,600 units. This is coming off the back of commencements in 2021, which, based on the government figures for the first 11 months, are on course to be in the region of 32,000.
The National Transport Authority’s ‘Draft Transport Strategy for the Greater Dublin Area for 2022 to 2042’ provides an update on the delivery of some of the major infrastructure projects, including Dublin’s BusConnects. The aim of these projects – as well as those from across the regions, such as the Cork Commuter Rail Programme, included in the NDP and as set out in Project Ireland 2040 – is to halve transport carbon emissions by 2030. Furthermore, the government’s forthcoming sustainability mobility policy focuses on safe walking, cycling and low-carbon travel initiatives under a €360m annual investment allocation, with €60m allocated for greenways.
2022 will see the continuation of smaller capital projects that optimise the usage of the existing transport network, aligning with the government’s priority around the protection and renewal of existing transport assets as outlined in the National Investment Framework for Transport in Ireland.
Repair, maintenance and improvement
In addition to new build construction works; repair, maintenance and improvement (RMI) has always formed a significant element of construction output, albeit with lower individual project value. This is likely to increase in 2022 and beyond as the government invests in retrofit pathfinder programmes to achieve the increased energy efficiency and carbon reduction commitments set out in the Climate Action Plan.
Ultimately, the outlook for construction costs and tender prices for 2022 remains uncertain, thanks to continued volatility in the market and the potential unknown impacts of any further coronavirus wave. Nonetheless, the experience of 2021 perhaps provides a guide to what lies ahead.
While material manufacturers and suppliers may have significantly restored capacity and production, it may be optimistic to expect that material prices may reduce or remain stagnant.
Globally, the AECOM Review says that there have been significant increases in energy costs over the past number of months, and the logistics supply chain continues to experience significant cost increases. These trends in input costs will likely keep upward pressure on material price increases throughout 2022, though moderated from the exceptional 2021 levels of increase.
In addition, the broader consumer price inflation rate increases will inevitably lead to pressure on labour costs. Regarding construction labour costs, the government recently approved the labour court recommendation for an increase in labour rates of approximately 2.8% in February 2022 and February 2023.
The recent government announcement with respect to changes – including indexation and the calculations under the price variation clauses under public works contracts – to address the risk of price inflation is welcome. However, it is limited in nature. In 2022, AECOM expects average tender price inflation of 5%.
A critical issue for the broader built environment sector is the difficulty in providing the necessary skills for the industry. The average number employed in the industry in the first half of 2021 (as per the Central Statistics Office Labour Force Survey) was approximately 125,000, which was 16.5% less than the pre-pandemic level of 150,000 in Q3 2019.
However, there is some good news with Q3 2021 numbers jumping by 15% from Q2 to 146,000, which signals a significant boost. However, the industry will need to continue attracting more workers to meet demand and grow to achieve its full growth potential.
A full copy of the AECOM Ireland Annual Review 2022 can be downloaded at the AECOM website, https://communications.aecom.com/ireland-annual-review-2022