Tender prices set to rise 6% in 2016

This year is expected to see significant further recovery in the value of construction output and another rise in tender prices.

The latest annual review from leading industry consultancy body, AECOM shows that the recovery in the Irish construction sector picked up considerable pace last year — albeit on a skewed level — and shows no sign of slowing down.

“We saw the construction industry gradually return to growth in 2014 after the dramatic drop between 2007 and 2011 and this growth pattern continued in 2015,” according to John O’Regan, AECOM’s head of programme, cost and consultancy.

We would estimate the value of construction output to have been around €12.25bn in 2015, a 14% rise on 2014, and we anticipate double-digit growth this year,” he added.

While that sounds healthy and Mr O’Regan stated that confidence has returned to the construction sector, he struck a note of caution by saying much of the recovery and growth has been concentrated in the Dublin area.

“Notwithstanding this, we have seen the beginnings of the recovery in the regions with an increase in the number of enquiries, along with previously shelved projects being revisited,” he said.

Also on the increase is the amount of money being quoted by building firms for construction projects.

Tender prices grew by 5% last year and AECOM is anticipating further growth of 6% this year; not a great sign if it becomes a regular trend, according to the company.

“2015 saw tender price increases of around 5% which — if exceeded or repeated over a number of years — would reduce the competitive advantage that Irish construction has enjoyed over recent years,” said Mr O’Regan.

He also said AECOM started to see some “stress fractures” appear in segments of the construction industry in the second half of 2015 and they’re likely to continue into this year.

Chief among them are capacity concerns in Dublin, which could have a negative effect for the rest of the country.

“The capacity of tier-one Irish contractors to deliver the likely number of large projects is going to be limited. It is unlikely that large international contractors will be attracted to the Irish market, particularly with the vibrancy of the London market,” Mr O’Regan added.

To that end, Northern contractors, returning emigrants and tier-two Irish contractors are likely to increase their resources and output.