The BNP Paribas Real Estate Ireland Construction PMI report tells us that June saw the first reduction in construction activity since pandemic restrictions were lifted. Most of the contraction is in the commercial property sector and largely reflects the effect of rapid cost inflation.
A contraction in activity isn’t surprising when one considers the “perfect storm” of current issues. The State introduced a welcome scheme to cover up to 70pc of exceptional inflation, but this applies to public sector contracts only.
In the private sector, as chartered building surveyor Krystyna Rawicz told me, contractors pricing jobs face a choice between estimating inflation over a long period (and probably not getting the job) or costing at today’s prices and taking a huge risk.
Before the financial crash there were 250,000 people working in construction. That reduced to 140,000 and is now back to 180,000, so there are 25pc less people doing the same volume of work.
The CIF says there used to be 138 contractors in Ireland, and now there are 77. A couple of recent insolvency events – one for a major contractor, and one for a fit-out specialist – demonstrate the precarious balance in the industry, even at a time of huge demand.
The pressure for more output will intensify as we near the 2030 targets set by the National Development Plan for housing and infrastructural projects.
More demand for production will come from the Climate Act, with a target of retrofitting 500,000 houses, 10,000 commercial buildings and all public buildings by 2030. For the domestic properties, that means retrofitting approximately 4,700 houses every month for the next eight years. That’s not going to happen.
The solution, according to Ms Rawicz, lies in embracing modular construction, also available for retrofitting, that is much less labour intensive, but little used here. The building control authorities also need to be more innovative in approving modular, and other new types of construction.
Meanwhile, I’d like to offer a warm welcome to about 350 members of the Society of Industrial and Office Realtors who have arrived in Ireland for its international European conference, with half the delegates travelling from the US.
A packed agenda included 30 members cycling to Kilkenny and back to raise funds for the SIOR Foundation Ukrainian Appeal, and attendees also took tours of Dublin Port and the Microsoft campus at Sandyford, Co Dublin.
On Tuesday, at Powerscourt Golf Club, Co Wicklow, the “SIOR Ryder Cup” was hotly contested, with 34 members playing. James Mulhall, of Murphy Mulhall, captained Team Europe while Team USA was headed by Dan Smolensky, from Chicago. Team Europe won a narrow victory.
Top Irish players included Iain Finnegan, Corkman Karl McCoy, Bank of Ireland’s Conor Linehan and Sean Twomey, head of property at Addleshaw Goddard.
A two-day conference takes place, today and tomorrow, at the Conrad Dublin Hotel, during which I am honoured to be delivering a motivational talk on “Small steps to success”.
The week’s activities aim to strengthen relationships between international members who refer global clients to each other, and educate delegates on economic, business and real estate trends.
It’s an opportunity to demonstrate to top global brokers the extraordinary array of overseas companies in Ireland, and highlight the number of Irish firms with bases abroad, all requiring real estate services.