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‘ A VERY PRONOUNCED DECLINE IN COMMERCIAL BUILDING ACTIVITY ’ – CONSTRUCTION SLOWDOWN HIT NADIR FOR 2023 IN AUGUST
Activity in Ireland ’ s construction sector tumbled to its lowest level this year last month .
And while a sharp slowdown in the building of commercial projects such as offices fuelled the latest fall , housing construction activity also remained below the level it was at in August last year and in decline overall last month .
Although employers in the sector remain optimistic overall , with rising employment despite a fall in new orders , cost pressures are mounting again after input price inflation hit a four-month high , according to the latest BNP Paribas Real Estate Ireland Purchasing Managers Index ( PMI ) report .
The overall PMI reading for the construction sector in August was 44.9 .
A figure below 50 indicates contraction , and above 50 , expansion .
In August last year , it stood at 46.9 . In July this year , it was at 45.6 .
John McCartney , director and head of research at BNP Paribas Real Estate Ireland , said the latest readings are a “ blend of emerging and ongoing dynamics ”.
“ The most notable new trend is a very pronounced decline in commercial building activity in July and August , bucking the trend of consistent expansion over the first half of 2022 ,” he said .
“ This is a welcome development as it limits the potential for oversupply in areas of commercial property , such as offices , where vacancy rates have been rising ,” Mr McCartney added .
According to a report earlier this month from property consultancy HWBC , Dublin ’ s office vacancy rate currently stands at 14.4pc .
It noted that a correction in the segment , a with belowaverage take-up rate , commenced in the first quarter of 2022 and is now “ well advanced ”.
The report added that it anticipates a sentiment shift during the first half of next year , as capital values stabilise , and new supply slows down “ to a trickle ”.
Mr McCartney said that the pace of input cost inflation has also increased in the construction sector .
“ A second notable is the re-acceleration of input cost inflation in July and August after nearly two years of receding cost pressures ,” he said .
“ This jars somewhat with the latest CSO data on building materials and labour costs , but could be an early sign that reemerging energy price increases since June are beginning to impact the sector ,” he added .
Despite this , most Irish building firms remain optimistic .
They hired more people for the eighth consecutive month and 88pc of those surveyed said they expect to be as busy or busier in 12 months ’ time .
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