Irish construction activity contracted in October for the fourth time in five months, dragged down particularly by civil engineering amid caution among clients in a weakening economy, price pressures and supply shortages.
The latest monthly reading of BNP Paribas Real Estate Ireland’s construction purchasing managers’ index showed that it declined to 47.4 in October from 50.2 for the previous month. A score above 50 signifies expansion.
The index had contracted in each of the three months between June and August.
The October reading for civil engineering activity was 37, marking an eighth straight month of decline, while housing was 49.7 and commercial activity was 45.1, according to BNP Paribas Real Estate.
Occupier demand
“Overall activity was dragged lower in October by a continued contraction in civil engineering and commercial building. The pullback in commercial reflects slowing office starts in Dublin where a strong pipeline of projects will be coming to completion over the next 18 months to meet occupier demand,” said John McCartney, director and head of research at the firm.
This comes at a time when there are growing concerns about the near-term demand for offices, as companies continue to tweak how the workplace will function post-Covid and large technology groups – including Meta, Stripe and Twitter – have begun to lay off staff, as the sector suffers from declining demand and a slump in stock market valuations.
“However, we expect to see further strong activity in the logistics sector as occupier demand for warehousing space has led to low vacancy rates and solid rental growth.”
Meanwhile, figures released by the Department of Housing recently show the number of residential units where construction has commenced had fallen 10 per cent on the year to 27,417 in September on a 12-month rolling basis – down from 34,846 in March and driven by a fall-off in apartment starts.
“With demand remaining muted, construction firms scaled back their purchasing activity for the fifth month running, and to a greater extent than in the previous survey period,” BNP Paribas Real Estate said.
“A number of respondents indicated a preference for using up existing inventory as opposed to purchasing new inputs. Input costs continued to increase at a rapid pace in October, albeit one that was softer than in the previous month. Higher raw material prices were often mentioned by panellists.”
