Further fall in construction activity as demand remains subdued, new figures show

Construction firms scaled back purchasing activity for the fifth month running, according to BNP Paribas Real Estate survey

Housebuilding activity remains largely unchanged from September with 20,800 dwellings completed in the first three quarters of 2022. File picture

Ireland’s construction sector recorded a solid reduction in activity in October as project delays and softer demand caused a drop in new orders.

The housing, commercial and civil engineering sectors all saw a reduction in activity last month with the monthly survey of purchasing managers by BNP Paribas Real Estate Ireland now showing a decrease in four of the past five months.

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. A number of respondents to the survey indicated a preference for using up existing inventory as opposed to purchasing new inputs.

“Overall activity was dragged lower in October by a continued contraction in civil engineering and commercial building,” John McCartney, director & head of research at BNP Paribas Real Estate Ireland said.

John McCartney of BNP Paribas Real Estate said: '[A]ctivity was dragged lower in October by a continued contraction in civil engineering and commercial building.' File picture

“The pull-back 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. 

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.

Housing activity was broadly unchanged from September. Recent CSO data showed a 53% rise in housing completions between January and September compared with the same period in 2021.

“With 20,800 dwellings completed in the first three quarters, our forecast of 28,000 units for the full year is looking good,” Mr McCartney said.

On a more positive note, construction employment continued to increase and business confidence picked up. 

There was further evidence of supply-chain disruption easing as the incidence of delivery delays was the least pronounced since the outbreak of the Covid-19 pandemic. 

Where lead times lengthened, companies reported some ongoing issues in supply chains, with the war in Ukraine also hampering deliveries.

While inflation is causing construction input costs to rise strongly, the rate of inflation has now been moderating for one year.