Construction activity expanded last month at the fastest pace in more than two years, with housing and commercial projects both attracting momentum, according to the latest BNP Paribas Real Estate Ireland index for the sector.
The increase in activity in April was the second consecutive month of expansion, marking the first back-to-back increase in activity for almost two years.
The index rose to a reading of 53.2 last month, clearing the 50 no-change mark, with this “solid” rate of expansion the fastest recorded since March 2022. Anecdotal evidence suggested that growth of new business was the main factor behind this rise in activity, BNP Paribas Real Estate Ireland said.
As was the case in March construction firms signalled that they had increased their activity on both housing and commercial projects in April. Commercial construction posted the stronger expansion, while the rise in residential activity was “solid” despite softening from the previous survey period.
“Increased activity was reported across the board,” said John McCartney, director and head of research at BNP Paribas Real Estate Ireland.
While the number of residential dwellings under construction dipped last year as completions outstripped new starts, this situation “reversed dramatically” in the first quarter of 2024, he noted, with 11,956 commencements and 5,841 completions in this period.
“There is uncertainty about whether the commencements surge is a once-off caused by developers rushing in to avail of the waiver of development contributions – this had been scheduled to expire on April 24th but has now been extended,” he said.
However, the index survey findings suggest “momentum may be sustained”, as new orders, employment and input purchases all rose further, while 87 per cent of building firms said they expected to be as busy or busier this time next year.
The index’s finding of strong expansion in commercial building reflects the fact that a large pipeline of office buildings is now getting to the “laborious” finishing-out stage, Mr McCartney added.
But with the market characterised by oversupply the flow of speculative office starts “tailed-off some time ago”, he said, with refurbishments and retrofits poised to account for an increasing share of commercial activity over the medium term.
New employment was created for the fifth consecutive month, although the rise in April eased from that seen in March.
An economic watchdog, the National Competitiveness and Productivity Council (NCPC), warned last week that the State needed to ease labour constraints in order to boost employment in the construction sector to meet housing needs. The sector employed 161,300 people as of the end of 2023, according to Central Statistics Office (CSO) figures.
Meanwhile, Deloitte’s latest crane survey, an analysis of construction activity, has found that new apartment schemes, a recovery in the hotel market and demand for student accommodation all drove activity in the market in 2023.
On student accommodation, it said an estimated 1,630 beds were added to the stock of purpose-built student accommodation in 2023. But completions in 2024 will be more limited, it noted, as just three schemes, totalling 1,160 beds, were actively on site at the start of 2024.
The rise in the delivery of new office space this year will increase the vacancy rate in this part of the market in the short term, Deloitte also said.
“Beyond 2024 the picture alters notably. An estimated 97,000sq m is due to complete construction in 2025, with the remainder due in 2026. With all space due in 2026 already pre-let, the last delivery of available new stock to the market will be next year,” said Deloitte economist and head of real estate research Kate English.
Ms English said barriers remained to bids to further increase activity in the housing market and that “despite the positives” that can be found in recent residential construction data it was important to note that the numbers are increasing from a low base. “The improvements should also not be taken for granted as challenges and indeed barriers remain,” she said.
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