herald

Monday 18 December 2017

Building slowdown 'threatens investment'

Bricks are to be made in Ireland again
Bricks are to be made in Ireland again

A SLOWDOWN in the growth of construction activity here could end up hurting Ireland's offering as a hub for foreign direct investment, Davy stockbrokers has warned.

It said there is not only a lack of housing, but also prime office space in Dublin.

Lack of finance is seen as a major reason for a slackening in the pace of new building.

The most recent data for the construction sector signalled a surprise slowdown in the pace of growth of construction of housing, as well as in the commercial sector and civil engineering as well.

Davy yesterday described the construction sector as "the one black spot" in terms of the country's recovery, noting that the purchasing managers' index for the sector had fallen rapidly from above 60 to 52, although it remains in growth mode.

"Given its relatively small size, the construction sector on its own is unlikely to hurt our headline GDP growth forecasts significantly in 2015," Davy economist Conal Mac Coille said.

"However, the lack of construction activity could signal the emergence of bottlenecks that could ultimately hurt Ireland's competitiveness and attractiveness as a location for foreign direct investment (FDI).

"For example, there is now clearly a lack not only of residential property but also prime office space in the capital."

A number of technology companies based in Dublin have said that the lack of office space in some areas is reaching critical levels and could hamper their investment plans.

The IDA has warned the lack of suitable space may cause Ireland to lose out on valuable foreign direct investment.

Late last year, data from property agent Savills forecast that rents in high-quality office blocks in the likes of Dublin 2 and Dublin 4 will increase sharply this year as supply starts to squeeze.

Savills head of research John McCartney told the Herald yesterday that rents are forecast to rise to €61 per square foot at the end of this year, increasing to €66 next year and €70 by the end of 2017 compared with €30 in 2012.

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