Office slowdown and planning bottlenecks ease construction inflation

Construction inflation is easing as a slowdown in office building and planning bottlenecks cool demand, new figures show.

Irish-headquartered quantity surveyors’ firm Linesight predicts the building industry will slow this year but says the longer-term prospects look positive.

It notes Central Statistics Office figures indicate high borrowing and labour costs will shrink output by 3 per cent.

Stephen Ashe, the firm’s senior director for Europe, says the industry has “witnessed a real slowdown in commercial development”. A slowdown in office occupancy is hitting demand for space, while landlords are spending cash on making older buildings more sustainable.

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Mr Ashe adds this, combined with a high number of projects caught in the planning process, will free resources over the final three months of this year and into 2024.

“This slowdown is driving hunger in the market from general contractors and subcontractors and, in turn, more competitive tenders,” he said.

Growth in the life sciences, energy, technology and high-tech manufacturing industries looks likely to continue, according to Mr Ashe. Linesight also believes that demand for data centre space will grow to support the further development of artificial intelligence and 5G mobile technology.

Its statement also notes the European Commission intends on “mobilising” more than €43 billion in public and private investment to tackle a shortage of microchips and boost the region’s technological leadership.

[ Recovery in construction stalls in July as inflation picks up again ]

A recent commission survey found that the industry expects demand for microchips to double by 2030. Linesight argues the Republic is in a good position to build on its strong reputation in the semiconductor manufacturing industry.

Meanwhile, the Government’s aim to generate 80 per cent of electricity from renewable sources by 2030 is likely to boost construction in this sector in coming years. Planning bottlenecks will shrink energy industry construction in 2023 but Linesight expects it to grow over the next four years at an annual rate of 3.4 per cent.

Building material prices have been easing in recent months, the firm notes, but remain at a high level following sustained inflation. Mr Ashe says a more predictable and stable environment is welcome.