This article was written by the MD of CIS, Tom Moloney for our 2016 Construction Market Review.
The Construction Information Services (CIS) 2016 Construction Market Review provides a comparative analysis of activity in the construction sector for 2016 and the corresponding periods of 2015 and 2014. It also provides an insight into the overall planning pipeline for 2017 and beyond on a sector by sector basis and in addition a regional analysis of the Republic of Ireland.
In 2016, the positive momentum was maintained, ending the year on a positive note with increased activity across several sectors and outside of Dublin. It is estimated that construction output was in excess of €14 billion, an increase of 15% on 2015. Employment in the sector continues to grow at an accelerated pace, with the CIF committed to attracting back the workforce displaced by the recession, to sustain the volume of ongoing construction activity. Over €8 billion in projects across all sectors moved On-site in 2016, up from €5.7 billion in 2015 and €3.4 billion in 2014 – 40% and 135% respectively.
2016 witnessed the UK vote to leave the European Union and the election of Donald Trump as the US President, the impact of both will take some time to play out in terms of the effect on the Irish economy and construction sector. In the closing months of 2016 there was consensus among industry commentators regarding the challenges facing the sector in 2017, namely the shortage in skilled resources, the lack of speculative investment in areas such as the residential sector, the funding for large scale developments and the unknown elements emulating from the Brexit decision.
Looking at the pipeline for 2017 and beyond, most sectors are demonstrating positive increases in projects at Plans Submitted, Plans Granted and projects commencing On-site. It will come as no surprise to note that the Residential sector is the showing the largest increase in plans being submitted. This is as a result of numerous initiatives by Government and NAMA in terms of social housing and developers commencing numerous large scale private sector projects such as Lansdowne Place in Ballsbridge, Dublin 4. Speculative development for some private developments may prove slow following the recent 4% cap on rent increases, however, the underlying activity appears to be healthy.
The vibrant Commercial sector will have in excess of 300,000 square meters of office space nearing completion in 2017. The sector has experienced an increase of 41% in projects commencing construction in 2016 compared to 2015 and over €1.9 billion has been submitted for planning approval in 2016, all of which will support the increasing demand from FDI companies looking to locate and/or expand in Ireland, in addition to the potential interest from global organisations who may be affected by Brexit. In terms of activity spreading to other regions, there has been a 95% increase in planning applications over 2015 for Munster, albeit it coming off a small base.
Government spend on infrastructure across all regions remains slow, with the value of projects moving to On-site falling by 6% in 2016 when compared to 2015, although there was an increase of 30% in the number of projects. The value of projects granted permission in 2016 increased by 174% over 2015, with a value in excess of €1.5 billion. According to CIS data, there is in excess of €6 billion in projects at Plans Submitted, Plans Granted or at Tender Stage and it could be inferred that some of these projects may progress to On-Site following the recent announcement of €2.65 billion in capital spending in the second half of 2017, to face the challenges of Brexit and ensure greater regional development.
The commencement of enabling works at the New Children’s Hospital in 2016 skews the data in terms of construction values. The value and volume of Medical projects going On-Site in 2016 remained static when compared to 2015. The trend is heading downwards, with projects submitted for planning permission falling by 21% over 2015.
The Education sector is showing declines in volume and value of 40% and 13% respectively of projects being granted permission in 2016 over 2015. Plans submitted also declined albeit at a much smaller rate of minus 3%.
The Hospitality sector is currently enjoying a resurgence in activity, assisted in no small measure by ‘Tourism Ireland’. 2016 witnessed a 179% increase or €440 million in projects commencing On-Site compared to 2015.
The volume and value of projects being submitted and granted permission are continually increasing, with strong performance in Connaught and Munster.
The Social, Sport, and Leisure sector experienced a 32% increase in the number of projects commencing construction in 2016. However, the value of these projects decrease by 10% when compared to 2015. The volume of projects at both Plans Submitted and Plans Granted stages in 2016 are trending downward, which will have a knock on effect for 2017.
Finally, in our recently published Construction Forecast Report 2017, we identified in excess of €19 billion in key projects which are under construction, going On-site or due to commence across all sectors throughout the Ireland (excluding the buoyant self-build market). This indicates that the industry will remain in an upward trajectory for some time to come.