Irish commercial construction activity slowed in August to levels last seen in early 2021, when the industry was hit by Covid-19 lockdown restrictions, according to a new report.
The latest BNP Paribas Real Estate Ireland construction purchasing managers survey showed that the contraction of commercial activity dragged on wider construction activity in the State.
The subindex for commercial activity fell to 41.9 in August from 45.3 in July. A reading below 50 suggests contraction in activity.
The headline construction purchasing managers’ index declined to 44.9 from 45.6 for the previous month. The housing subindex came to 46.3 and civil engineering stood at 40.8 in August.
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“The most notable new trend is a very pronounced decline in commercial building activity in July and August, bucking the trend of consistent expansion over the first half of 2023,” said John McCartney, director and head of research at BNP Paribas Real Estate Ireland.
“This is a welcome development as it limits the potential for oversupply in areas of commercial property, such as offices, where vacancy rates have been rising.”
Dublin’s headline office vacancy rate was 15.7 per cent at the end of June, up from 6.9 per cent at the outset of the Covid-19 pandemic in early 2020, according to property agent Lisney, driven by a surge in remote and hybrid working practices, multinational tech groups scaling back their property requirements and the effect of economic and geopolitical concerns on businesses.
At the end of June about 3.1 million square feet (288,000sq m) of office space was under construction in Dublin, according to Lisney estimates.
BNP Paribas Real Estate said members of the panel of 150 construction companies surveyed for the latest monthly report reported that activity levels remained constrained by demand weakness.
New orders across the wider industry reduced for the second straight month and to the greatest extent since December last year, it said. Panel members typically noted deteriorating demand conditions, linked to interest rate hikes and stubborn inflationary pressures.
However, Irish construction firms continued to express optimism in the year-ahead outlook for activity during August.
“The main factors underpinning the positive assessment for the future included hopes for an improvement in market demand, the launching of new product lines and the commencement of new projects,” it said.
“That said, the negative trends encapsulated in the latest survey data meant that business sentiment remained historically subdued.”
