Wednesday 26 July 2017

Builders face margins cut as Dublin costs to soar

Construction costs in Dublin are set to rise 8pc in 2017 - far faster than the 3.5pc global increase forecast in the latest International Construction Market Survey. Photo: PA
Construction costs in Dublin are set to rise 8pc in 2017 - far faster than the 3.5pc global increase forecast in the latest International Construction Market Survey. Photo: PA

Ronald Quinlan Commercial Property Editor

Dublin has been named in the top 10 of the world's most expensive cities to build - with a steep rise in costs set to hit builders' margins, a new report has found.

Margins in the capital are 5pc, close to the global average but less than big markets like London and New York, while costs here are rising sharply.

Construction costs in Dublin are set to rise 8pc in 2017 - far faster than the 3.5pc global increase forecast in the latest International Construction Market Survey.

Professional services company Turner & Townsend's annual report, analyses input costs like labour and materials and records average construction costs per square metre for commercial and residential development in 43 markets across the world.

According to the latest survey, Dublin is now the eighth most expensive city in the world to build in, with construction costs per square metre of $2,606 (€2,374). New York is the most expensive with an average cost of $3,807 per sq m followed by San Francisco ($3,549 per sq m).

In the European market, Zurich's rate of $3,528 per sq m makes it the most expensive. London is a distant second with a build cost of $3,213.99 per sq m. The UK's south is the fourth-most expensive European location at $2,617.28 per sq m while Dublin comes in fifth at $2,606 per sq m. The cheapest European city is Polish capital Warsaw, where it costs $782.05 per sq m.

Dublin is one of seven global 'hot' markets, where high construction cost inflation can be expected this year. The others are Amsterdam, London, New York, San Francisco, Tokyo and Dar Es Salaam, the report said.

At a European level, Dublin is ranked second for forecasted construction inflation behind Istanbul where costs are predicted to grow by 12pc this year. The predicted hike in construction costs in Dublin stands in stark contrast to Paris and Madrid where levels are expected to remain almost static, with a projected increase of just 0.5pc in both cities. London is expected to see its construction costs grow by 4.1pc this year.

The report reveals that the margins being achieved by contractors in Dublin, at 5pc, are in line with those being achieved by their global peers. The highest margins in Europe are being secured in Moscow (8pc), while the lowest margin is 3pc in Northern Ireland. In the US, margins of 7pc and 5.5pc are being achieved in New York and Seattle respectively.

Mark Kelly, MD of Turner & Townsend in Ireland, (pictured) said the report highlighted the "intense pressure on the Irish market, where high demand for resources and labour in the context of a growing skills shortage is leading to major price inflation in the capital".

"Growth is being driven in particular by commercial construction as well as the health and education sector - which is seeing major investment. By comparison, the residential market remains weak in the context of a severe lack of new building over the last eight years," he said.

Contractors and clients need to look to new technologies and methods, and better use of data and programme management to unlock savings, he said.

Irish Independent

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