Turner & Townsend: Republic of Ireland Construction Market Intelligence – Signs of stability

On balance, contractors believe the construction market is improving, with 37.5 percent of respondents suggesting the market is staying the same, while 37.5 percent suggest that it is warming and 25 percent say it is cooling.

The latest Irish construction market intelligence report for Q4 2023 depicts a phase of stabilisation, contrasting the volatility of previous years. Collated from insights gathered from Ireland’s contractors, the report shows key trends and sector dynamics amidst changing economic landscapes.

Contractors are currently divided in their market outlook, with 37.5 percent perceiving stability, an equal percentage sensing a warming trend, while a quarter observing a ‘cooling’ in market activity. A breakdown of sentiment across sectors shows housing as the top-performing sector, particularly in private housing, and this has been driven by supply-side government initiatives. Despite a slowdown in the pace of construction inflation and stabilising interest rates, tender price inflation is expected to continue, though at a reduced pace.

The industry faces significant challenges, including skilled labour shortages, rising construction costs, and extended lead times. Specialist sectors, including data centres, life sciences, and industrial, are particularly impacted, demanding specific trades and skills. While the commercial office sector experiences a downturn, housing is seeing a robust upswing, thanks to government schemes.

The Drive Towards Net-Zero
When asked about sustainability and initiatives employed to achieve net-zero targets, contractors report limited engagement in net-zero commitments, with significant action seen in less than a quarter of projects. High costs and regulatory barriers are the main hurdles.

The first half of 2023 recorded a Tender Price Index (TPI) of 2.5 percent, indicating a cooling from previous highs. Year-end projections suggest a leveling off at around 5 percent. Material and labour costs are expected to rise, with steelwork and concrete prices leading the increase. The labour market is also pressured by the cost of living crisis and skill scarcity.

The construction volume index has shown a decline, with the residential sector hit hardest. Civil engineering, however, displays robust growth, driven by large infrastructure projects. In retrofit projects, the focus has largely been on building fabric improvements, such as insulation and windows. Renewable energy solutions in MEP installations are becoming increasingly important.

Moving forward, the industry anticipates continued stabilisation in tender prices, albeit with a mindful eye on wage pressures and global macroeconomic uncertainties. The insights shared by contractors underscore the need for adaptability and strategic decision making to sustain competitiveness and address the evolving demands of the construction landscape.

The full report is available at: https://marketintelligence.turnerandtownsend.com/roimi-q4-2023-winter/sustainability