2020: A new decade of construction

As we kick off a new decade of construction, it’s tempting to reflect back over the past 10 years, however, so many unprecedented events – both positive and negative for the industry – coincided to make the functioning of the marketing place dysfunctional, it is more helpful at this stage to look forward and use international markets as our benchmark.

“The number of workers in the [construction] sector are building up, but slowly, and not in keeping with the demands of industry”. This is a sentiment shared by Paul Mitchell, cofounder of Mitchell McDermott construction consultants in a recent interview with Michael Cogley in the Sunday Independent. It has been known for a while now that pay increases are being demanded by construction workers as property prices and revenues soar – or are perceived to have soared. Companies are reportedly running into difficulty finding new employees, while their existing ones have currently laid down a 12pc pay claim over the next two years. Mitchell also noted that there wasn’t the same influx of workers coming from Eastern Europe that the industry attracted during the last boom. This is very likely as a result of improved living conditions and economic opportunities in their home countries; uprooting their lives and families would take great incentive. “When it comes to passing increased costs on to consumers, home-builders are stuck because there is only so much people can pay due to the Central Bank’s macro-prudential rules” Mitchell added, and this remains true for 2020.

While wages continue to be a difficulty, site values are rapidly becoming the bigger challenge for our clients. Analysts have suggested that Ireland is in need of at least 35,000 new homes a year, however only 18,000 were completed in 2018 and approximately 21,000 in 2019 (final tally not yet available).  We know that there is a lot of competition for the same sites, availability of serviced land is the immediate problem. It has been suggested that Government should be placing some of the blame on their own shoulders; arguably the Land Development Agency, or LDA, is the Government response to this. How effective a response it is remains to be seen…

In the same article referenced above, Michael Cogley also speaks to Orla Heagarty, assistant professor at the UCD School of Architecture, who says the leap in land trading has gotten to the point where “plenty of projects are no longer viable because the developer has paid too much for the land”. Heargarty goes on to speak about how there are a “number of shovel- ready sites back on the market as a consequence of planning changes which could give greater returns”. While it is not as common as suggested, this is certainly something that we have experienced over the past 12 months.

Despite the Department of Housing lessening their minimum standards in apartment complexes, viability is still an issue. Growth in the PRS and student accommodation sectors have masked this somewhat, over reliance on these sectors is not sustainable. The first six months of 2020 will tell a lot.