According to the Turner & Townsend International Construction Market Survey, the average construction costs average €2,608 per square meter in Dublin.
Dublin was recently named the sixth most expensive market to build in by the 2018 Turner & Townsend International Construction Market Survey with construction costs averaging €2,608 per square meters. The survey includes research on both commercial and residential real estate sectors across 46 different global markets. The report anticipates that global construction costs will continue to rise at a rate of 4.3 percent over the next year.
It is not surprising to see Dublin rising on the lists, especially with the numerous large-scale projects currently underway in the city. New York retained its position on the top of the lists, its average costs have increased by 3.5% to €3,276 per square meter from the previous year. Rounding out the remaining top five cities are San Francisco, Hong Kong, Zurich and our neighbor to the east, London, which averages at €3,039 per square meter.
Construction Costs Expected to Continue to Rise
In one notable finding of concern, the survey predicts the continued rising cost of building in Dublin to increase another 7% this year. A boom in office construction, student accommodations and an emerging build-to-rent sector are cited as the source of this anticipated significant cost increase. The report lists major commercial projects currently in the planning, development and construction stages as evidence of sustained growth including Grangegorman, the urban quarter in Dublin’s north inner city, the headquarters of energy company ESB, and the Capital Docks office and residential building.
Construction and infrastructure development slowed dramatically during the recession, leading to the deficit between demand and supply experienced in the market today. In contrast to this decade long slump in development, construction activity in Dublin has increased by 18% today. David Grin, Chairman of the firm Lotus Investment Group, acknowledges that, “This impressive pace has placed additional strain on labour, infrastructure, and industry resources. It has exposed weaknesses within the industry that will need to be remedied to maintain market growth and prevent a rapid increase in prices.” Price inflation is expected to increase at a rate of 6-7% due in the foreseeable future due to continued high levels of demand.
Anticipated Skilled Labour Shortage
The cost challenges faced by the Irish market may be exacerbated by an anticipated skills shortage. With older skilled workers exiting the workforce at a higher rate and fewer young workers replacing them, the construction industry is facing a human capital dilemma, which could result in domestic cost inflation. While there is no short-term solution to this problem and it will likely get worse before it gets better, there has been a campaign within the industry led by CIF, Engineers Ireland and the SCSI to actively recruit students and apprentices to the industry.
Recently, in an attempt to secure qualified workers for projects and expand their own crews, companies have begun recruiting from within the industry, attracting and poaching employees from competitors with offers of lucrative rewards and bonuses. This practice is not sustainable when you consider the size of the Irish population and workforce.
Overall, the survey forecasts a bright future for construction activity in Dublin and the greater Irish market, which will be encouraged by government plans to boost foreign investment from manufacturing and increase exports. The industry will also benefit from planned government investment in transportation, education, health care, residential housing and sustainable growth as part of the National Development Plan.