Construction worker productivity decline linked to lack of foremen
A shortage of experienced foremen to manage building teams and sites is contributing to a drop in the productivity of construction workers and driving up costs.
Construction costs will soar by up to 7pc this year, a new study by consultants Mitchell McDermott shows.
Rising costs are being fuelled by staff shortages and wage increases in the sector. The report noted that an office block that would have cost about €20m to build in 2015, would cost €25m now.
"Many contractors are reporting a sharp drop in productivity, which is resulting in increased costs and missed deadlines," said Paul Mitchell, one of the directors of the firm.
Last year, Pat McCann, the chief executive of Ireland's largest hotel group, Dalata, said that construction costs for hotels had also risen dramatically. At the time, Dalata was building its 180-bedroom Clayton Charlemont Hotel on Dublin's southside at a cost, including site acquisition, of about €225,000 per bedroom.
The expected rate of increase in construction costs this year is five times the rate of inflation.
The research is based on 68 construction projects valued at a total of more than €1.4bn. Total construction output in Ireland for 2018 is expected to have hit €21bn, a 16pc rise on 2017.
The report also noted that carpenters and electricians are among the workers in short supply. "While general operative rates increased by 2.5pc last year, wages for mechanical and electrical labour increased by 9pc and are predicted to grow by a further 5pc this year, twice the general operative rate," said Mr Mitchell.
"The increases are being driven by lack of supply and while more people are coming home, the sector is desperately short of a variety of workers including consultants, carpenters, electricians and labourers," he added.
Ireland's construction sector is now employing about 147,000 workers, but business lobby group Ibec said last summer that an additional 80,000 workers are needed in the sector to meet housing demand.
The study found that while hotel and office construction in Dublin means both are well on the way to filling demand, student accommodation nationally isn't, and housing remains undersupplied.
Mitchell McDermott said that there is a "considerable amount" of apartment construction in the planning pipeline and that this year should prove a "bumper year" for apartment planning applications.
"Apartment construction is slow, but product is coming," said Mr Mitchell.
Meanwhile, research by Deloitte said property developer sentiment remains strong in Dublin, boosted by increased activity across the residential, office and hotel sectors last year, though new office development looks set to slow.