The Irish construction
and housebuilding sector has now turned a corner after several years of
decline, with renewed focus on recovery after a lengthy and deep recession. In
2016, the recovery in the Irish construction sector is set to accelerate and
experience the highest rate of output growth in over a decade at around 20% to
reach around €15.1bn. However, industry output levels are still only a fraction
of those seen during the peak of 2007 when output reached over €38bn.
Current estimates
suggest that total output in the Irish construction industry will continue to
see growth throughout the period 2017-2020, albeit at a lower rate than
experienced during 2014-16. In terms of regional construction output, the East
and Midlands region (also known as Leinster) continues to have the largest
share of the construction market, with over 8,000 projects at various stages of
development.
The private
non-residential sector, which includes all industrial, commercial, retail,
agricultural, and hotel & leisure construction output, is now experiencing
a strong recovery in development activity, and this is expected to continue in
2016, with activity levels increasing and output forecast to grow by over 23%. The
Irish market is also benefiting from large scale FDI within the bio-pharma and
data centre sectors and there are several large-scale bio-pharmaceutical, clean
technology and data centre developments currently taking place across Ireland.
In 2015, the value of
construction related investment associated with new social infrastructure
construction projects also rose strongly, and increased public capital
programme allocations for the period 2016 to 2021 will support an increase in
overall output.
Both education and
healthcare construction output is expected to benefit from investment under the
Capital Plan 2016-2021, with a new €3.8bn School Building Programme to take
place over the same period. The residential sector has been slow to recover
from the economic and property downturn and, although annual housing
completions are beginning to rise, there is now a very significant demand for
housing in the major urban areas which is causing significant increases in
rental costs, something which should stimulate housebuilding activity.
The Irish contracting
industry is highly fragmented with a large number of small to medium sized
companies, many of whom specialise in repair and maintenance activities and
operate on a regional basis. Unlike the UK market, which is dominated by a
dozen or so large, quoted companies with separate commercial, civil engineering
and housebuilding operations, the Irish market is characterised by many smaller
companies who operate across both residential and commercial sectors.
“The supply structure for the Irish housebuilding market
is also highly fragmented with no more than one player having more than 2% of
the market” said Keith Taylor, Director of AMA Research.
“Over the past 10 years, the structure of
the industry has changed fundamentally, with the collapse of several of
Ireland’s largest housebuilders and developers, and there are now just two
publicly quoted housebuilders in Ireland.”
Overall output values
are expected to increase by around 10% in 2017 and by 9-10% thereafter to until
2020. Into the medium-term, the return to growth is expected to be driven by
the private commercial and residential sectors - supported by growing
investment in social housing - and civil engineering activity. Output will also
be supported by improving consumer and investor confidence as regional and
global economic conditions improve.
Both the Irish
construction and engineering industries have strong exposure to the UK market. Though
the UK’s decision to leave the EU has caused uncertainty to the economic
outlook, the full impact of ‘Brexit’ on the Irish economy and construction and
housebuilding industries will take time to emerge. However, there may be a more
positive impact on the Irish construction industry with opportunities for
UK-based corporates and financial sector firms to relocate from the UK to
elsewhere within the European single market.
The ‘Construction
and Housebuilding Market Report – Republic of Ireland - 2016-2020 Analysis’
report is published by AMA Research, a leading provider of market research and
consultancy services within the construction and home improvement markets. The
report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242
235724.
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