Homebuilding in the Republic surged in October, according to new research from BNP Paribas Real Estate Ireland, but an ongoing drop-off in commercial building dragged on the construction sector overall as work on offices slowed to a halt.
Input costs, meanwhile, continued to grow last month, according to the property agent’s latest construction sector purchasing managers’ index (PMI), based on a survey of more than 150 firms.
Still, builders are “increasingly confident” that construction output will rise over the next 12 months amid strong demand for housing.
Positive sentiment across the sector is also supporting increased hiring with construction firms feeling confident that workloads will continue to increase into 2025, BNP Paribas said.
The survey indicates that employment growth in the construction sector expanded in October for the second month running, albeit at a modest pace that was broadly in line with September.
Overall, the October headline index remained just below the neutral 50 threshold, which separates growth in activity from contraction, moving from 49 in September to 49.4.
The reading suggests that overall building activity contracted but at a marginally slower pace than the previous month.
Bucking the headline trend, homebuilding activity continued to improve in the month and has now been stable or rising for the past nine months, said BNP Paribas Real Estate director and head of research John McCartney, after falling “continuously” throughout 2023.
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Residential activity jumped from a reading of 51 in September to 56.4 in October, representing a sharp acceleration of the subsector’s growth pattern, he said.
The surge in activity may relate to the timing of various Government incentives and related deadlines, Mr McCartney said.
“Deadlines to avail of the development levy waiver and the water connection charge refund drove sharp spikes in the number of commencement notices filed in April and September respectively,” Mr McCartney said. “But a condition of these incentives is that units must be completed before end-2026. So, with the paperwork done, developers are now getting on with the actual construction.”
The headline index was dragged down by the commercial sector, which dropped further in contraction territory last month, from a reading of 47.9 to 47 in October.
However, he said the decline is explained by the drop-off in office building due to the relative oversupply of new developments compared to demand in Dublin.
“The tapering-off of commercial activity is also welcome, as it reflects a slowdown in office building,” he said.
“Dublin’s office market is now amply supplied and, although a significant quantity of new space is still winding its way to completion, new starts have dried up. This will help to limit further vacancy increases, allowing demand to catch up in time.”
Take-up of Dublin office space by technology companies shrank to just 7.1 per cent in the third quarter, BNP said in a report published last week. The sector accounted for half of all business a few years ago.
Between 2017 and 2021 the information and communications technology sector accounted for 51 per cent of all Dublin office take-up, with many of the world’s biggest tech companies consolidating their operations and growing their staffing levels in the Irish market.
But the sector’s share of Dublin office take-up has only averaged 22 per cent since the start of 2022, and in the third quarter of 2024, it fell to its lowest share since the start of BNP Paribas Real Estate’s records, accounting for just 7.1 per cent of the pie.
Consequently, Dublin has one of the highest rates of office vacancy among European cities with the rate edging up to 15.7 per cent at the end of September from 15.2 per cent at the start of the third quarter.
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