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review AECOM Ireland Annual Review 2017
North South Interconnector,
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oral hearing andHatch
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Current projects include:
A6 Randalstown to Castledawson, Northern Ireland Department of Justice, Value for Money Review of Prisoner
Transport
Athy Distributor Road, Co. Kildare
Dublin Airport Authority runway works
BBC, Northern Ireland
Dublin Airport capacity development
Beaumont Hospital, Dublin
Dublin Airport masterplan
Belfast City Council, Leisure transformation programme
Dublin City Council Ballymun boilerhouse, Dublin
Belfast City Council Office
Dún Laoghaire Shopping Centre, Dublin
Bon Secours Hospital North Block Extension, Cork
D7 Educate Together primary school, Grangegorman campus
Brown Thomas, Dublin & Cork
Endoscopy, Physical Medicine and Oncology,
Capital Dock, Dublin
Naas General Hospital, Co. Kildare
Castlebar Hospice, Mayo
ESB, Project Fitzwilliam fit out, Dublin
Castletownbere Transport Study
EY Offices, Dublin, Limerick and Belfast
Cath lab and theatre, Our Lady’s Children’s Hospital Crumlin,
Failte Ireland capital programme
Dublin
Foynes–Limerick improvement scheme, Limerick
Central Bank headquarters, Dublin
Frascati Shopping Centre, Dublin
Churchfield Housing Phase 1, Southill, Limerick
Grangegorman Development Agency, primary care centre,
Citi North Wall Quay amenities, Dublin
Dublin
Clancy Quay residential scheme, Dublin
Grangegorman Development Agency transport planning
Clare Cultural Centre, Ennis, Co. Clare advisory services, Dublin
Coláiste Chiaráin, Limerick Hynes Building, Galway
Connemara Visitors Centre, Galway Irish Glass Bottle site, Dublin
Cork City North West Primary Care Centre IT Tallaght campus, Dublin
Cork-Limerick Strategic Corridor Assessment JP Morgan, Dublin
Courts bundle PPP, Ireland Liffey Valley Shopping Centre, West Dublin
Curragh Racecourse, Co. Kildare Limerick City & County Council, Opera site
DCU Block F teaching block LinkedIn Headquarters, Dublin
2 AECOM
Contents Introduction 3 Industry review: Republic of Ireland 5 2016 performance and medium term outlook 6 Sector performance 8 Construction costs and tender prices 11 Industry review: Northern Ireland 13 Business intelligence 17 Angela McGowan, Regional Director, CBI Northern Ireland 18 Danny McCoy, CEO, Irish Business and Employers’ Confederation (Ibec) 20 AECOM in Ireland: profile Geographies 23 Ireland 24 European construction activity trends 28 Thought leadership 31 Event venues: a catalyst for regeneration 32 Empty building syndrome 34 AECOM 2017 Review Survey results 36 Indicative building costs 38 AECOM in Ireland news 39 AECOM 1
Roscommon
AECOM Ireland
County
Annual
Council
ReviewCivic
2017Offices,
Roscommon.
AECOM services: Cost management.
Image courtesy of Christian Richters Photographer
Introduction
2017 – Ireland needs significant infrastructure and
residential spend to sustain economic growth
At the Dublin launch of AECOM’s development in central Belfast also continued growth in construction
2016 Ireland Review, economist, Jim increased, with office rents at about output forecast across the Island,
Power, warned that the biggest risks half central Dublin levels. Similarly the opportunities remain strong.
to continued economic growth across rent across the residential sector also As we previously noted, skills
the Island were uncertainties in the shows a disparity, with typical rent in shortages and cost competitiveness
national and international economic Belfast around 35 per cent cheaper are the principle risks. On a macro
and political arenas. Twelve months compared to the equivalent in Dublin. level, the risks are likely to be the
on, we have a minority government in same uncertainties that Jim Power
the Republic of Ireland and political AECOM analysis 2014 (see page previously identified, such as Brexit,
uncertainty in Northern Ireland, the 6), suggests that if the ROI’s coupled with increasing political
UK has voted to leave the EU and construction industry had progressed unease across Europe and the
Donald Trump is the president-elect at the recognised ‘normal’ level of potential for rising international
of the United States. 12 per cent of GNP from 2009 to energy costs to hit growth.
2016 inclusive, there would have
Despite these upheavals, economic been €63 billion more spent on This review looks at these
output in the Republic of Ireland (ROI) construction compared to actual opportunities and risks, and includes
continues to rise, with the Economic spend in the same period. This is interviews with Irish Business and
and Social Research Institute (ESRI) an oversimplification, but it is clear Employers’ Confederation (Ibec)
estimating GDP growth of 4.2 per that years of under investment by CEO, Danny McCoy, and the Regional
cent in 2016; the fourth year of strong the private and public sectors in Director of the Confederation of
growth. Construction output has also physical and social infrastructure British Industry (CBI) Northern Ireland,
continued to grow at pace, with an will diminish the attractiveness of Angela McGowan, who share their
estimated 15 per cent increase in the the Island as an investment location thoughts on the uncertainties of
value of output during the year. While if spending is not accelerated. For Brexit and a Trump presidency.
there has been significant growth our 2017 Annual Review, we have
across all sectors and the ROI regions, carried out a survey of approximately It also contains thought leadership
the central Dublin commercial sector 4000 people from across the Island’s articles and detailed AECOM 2017
is booming. Other sectors, such property and construction sectors. Review Survey findings.
as retail and residential, must While the results of our 2017 Review
perform better in 2017 and beyond Survey suggest the general sentiment We hope you enjoy the read and look
to catch up. is very positive, a key finding forward to delivering more exciting
indicates that skills shortages, cost projects with you in 2017.
Meanwhile, Northern Ireland’s competitiveness and deficiencies
economy continued to grow at a in physical infrastructure have
modest level in 2016. Construction presented challenges in attracting John O’Regan
output in the 12 months to mid 2016 foreign direct investment. Programme, Cost, Consultancy Lead,
was up 8 per cent compared to the Ireland
previous 12 months, with continuing So, what are 2017’s potential
growth anticipated. Commercial office opportunities and risks? With john.o’regan@aecom.com
AECOM 3
AECOM Ireland Annual Review 2017 It is essential that we attract back our skilled resources, maintain competitiveness and work to a cohesive plan to address the significant deficits from seven years of under investment. LinkedIn, Munich, Germany. AECOM services: Integrated multidisciplinary services. 4 AECOM
Industry review:
Republic of Ireland
AECOM 5
AECOM Ireland Annual Review 2017
2016 Performance and to the right. Here we are stuck in the recruitment being seen as the biggest
medium-term outlook middle”, on social media. The truth is, challenges to business; it is clear
By any measure, 2016 has been no one really knows how these events that the drive to attract experienced
another good year for the construction will impact the economy generally, let craftsmen and industry professionals
industry. Employment has continued alone the construction sector. to the sector will move into full swing in
to grow, with the number employed in 2017 as more projects begin.
the sector up over 9,000 in Q3 2016, When asked specifically about the
compared to the same period in 2015, impact of the UK leaving the EU, Domestically, businesses involved
while planning permissions granted for respondents to the AECOM 2017 in public sector schemes will be
non-residential floor space were up 70 Review Survey were largely pessimistic, required to adopt the interim public
per cent in the 12 months to July 2016, with 49 per cent believing Brexit will works contract measures, which
creating a positive outlook for 2017 have a somewhat or very negative become mandatory in 2017. While
and beyond. With 2016 construction impact on their businesses over 2017- the nine-month transitionary period
output sitting at around €14.5 billion 2018, followed by 34 per cent who has been beneficial for the industry, it
in 2016, this represents a 15 per cent were neutral and 17 per cent who feel is still early days. Only in 2017 will we
increase on 2015, largely driven by somewhat or very positive. have a better understanding of how
the commercial boom and to a lesser the measures are being applied and
extent by the residential market which Nevertheless, respondents had an received by the industry. Certainly the
is starting to increase output, albeit overall positive outlook for 2017, with measures are being seen as a positive
much slower than required. It is also 69 per cent expecting business to move; however, there are concerns
worth noting that construction activity grow, with those who proffered an regarding the complexity of the
started to pick up in the regions in estimated percentage of this growth process; the additional time needed
the second half of 2016, but remains averaging 21 per cent. We expect for tender evaluation and award; the
sluggish compared to the greater the value of construction output risk that projects will stall; and potential
Dublin area. to increase by around 20 per cent procurement process challenges.
in 2017. It is no surprise then that
Challenges and risks undoubtedly respondents identified resources In the medium-term, and to fully
lay ahead, both domestically and and tender inflation as the biggest understand our position in the current
internationally. In the aftermath of the challenges to domestic construction industry cycle, it is important to reflect
US presidential election, many people projects in 2017, which aligns with on where we have come from.
quoted “Trump to the left of us, Brexit controlling costs, staff retention and
EY,
Park Place Station Building, Dublin 2.
AECOM services: Architecture, mechanical
and electrical consultancy, cost management,
project management, PSDP.
6 AECOM
Key statistics at a glance
Construction output breakdown 2016 Non-residential planning permission granted
Aecom estimates (€m) July 2015–June 2016 (‘000sq m)
6,000 Other buildings
for social use
90
5,000 Commercial buildings
Govt., Health 889
and Education
4,000 419
3,000
2,000
Industrial
1,000 buildings
U.S. Army Base Camp Carroll 411
0
Residential
Civil Engineering
Social
Infrastructure
Private
Non-residential
Buildings for agriculture
1054
Source: Central Statistics Office
Employment in construction sector Construction enterprises, personnel and turnover
(‘000)
200,000 70,000
300 180,000 63,000
260.3 160,000 56,000
250
140,000 49,000
200 120,000 42,000
100,000 35,000
150
128.2
80,000 28,000
100 21,000
60,000
40,000 14,000
50
13.6 8.7 Male 20,000 7,000
0 Female
0 0
2007 (Q2) 2016 (Q2)
2008 2009 2010 2011 2012 2013 2014
Source: Central Statistics Office Source: Central Statistics Office
Enterprises (number right axis)
Person engaged (number left axis)
Turnover (€ million right axis)
AECOM 7
AECOM Ireland Annual Review 2017
Figure 1 tracks actual/projected In conclusion, the horizon is bright for the coveted equilibrium of continuous
construction output across a 20 year the construction sector. However, to modest growth, as we mentioned
period versus a targeted output of 12 maximise the benefits for the industry previously. While severely constrained
per cent of GNP, clearly illustrating the and wider economy, it is essential that since the crash of 2008, public
scale of the construction industry’s we attract back our skilled resources, sector capital investment has been
collapse and, more interestingly, the maintain competitiveness and work significantly less volatile than private
journey left to return to that target to a cohesive plan to address the sector investment.
measure of 12 per cent GNP which the significant deficits from seven years of
chart shows in 2022 when the lines underinvestment. Ireland’s Budget 2017 sets out the
next intersect again after 2009. It is government’s multi-annual capital
worth us asking: what will the economy Sector performance investment plan through to 2019.
have foregone in this 13 year period A significant feature of the construction Table 1 overleaf sets out the
through this lack of capital investment? industry is that it crosses all business government departmental split for the
and consumer sectors. In theory, this same period, and their projected out-
There are many possible answers should be a good thing, and protect the turn spend for same in 2016.
to this question including that we industry from a cyclical workload and
exceeded the 12 per cent of GNP output in Euro terms; when one sector As indicated in the table, the
spend during the Celtic Tiger, which in the economy performs poorly, others government’s capital investment plan
is correct, and this is a necessary may be booming, balancing things is providing for growth in spending of
correction, however in a fast-growing out. Unfortunately, in a small, open 8.8 per cent, 16.7 per cent and 14.7
economy that is not unexpected and economy, such as Ireland, this coveted per cent from 2017 through to 2019.
unfortunately significant elements equilibrium is difficult to achieve, thus This equates to around €16 billion — a
of the spend in that period were our construction industry historically 15.2 per cent increase on the provision
not wisely invested. Since 2010 the tends to be very cyclical. for the same three years in the
shortfall has been €63 billion and a previous year’s multi-annual plan. As
further €26 billion shortfall is projected On the following pages, we look at such, the capital plan through to 2019
by 2022 unless corrective action is emerging trends across key sectors represents a significant improvement
taken. The collective private and public in 2016, how they could fare in 2017, on that which is included in Budget
sector underinvestment of potentially and the implications for Ireland’s 2016. However, it should be noted that
€89 billion is a significant infrastructure construction industry. these are value increases, and that
deficit and it is critical that we tender price rises need to be taken into
accelerate rectifying the infrastructure Public sector account when assessing the potential
deficit through a planned and managed The public sector plays a big part in the volume increases and knock-on
investment programme. strength of the construction industry. benefits in terms of employment. The
Capital investment is often considered bulk of the increased expenditure is
a key tool in helping governments find going towards housing in response to
Figure 1
Actual/potential construction output*
How long would it take to reach optimum output
Optimum construction output based on 12% of GNP
45,000
40,000
35,000
30,000 260k
245k
25,000 215k
20,000 185k
15,000 150k
Employment (ROI)
10,000
0
5,000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 (e)
2017(f)
2018
2019
2020
2021
2022
2023
2024
2025
*Pre – 2012 output based on “The Irish Construction Industry 2012” SCSI/DKM.
2013 – 2018 AECOM estimates. Post – 2018 based on hypothetical 10 per cent per annum growth
8 AECOMTable 1: Multi-annual capital investment allocations
Department 2016 2017 2018 2019 2017 - 19 €m
Agriculture, Food & the Marine 217 238 238 238 714
Arts, Heritage, Regional, Rural & Gaeltacht Affairs* 136 119 115 118 352
Communications, Climate Action & Environment 121 171 201 256 628
Defence 68 74 74 85 233
Education & Skills 595 690 714 745 2,149
Health* 414 454 473 550 1,477
Housing, Planning & Local Government 473 702 788 764 2,254
Jobs, Enterprise & Innovation 503 555 520 530 1,605
Justice & Equality* 157 180 141 173 494
Public Expenditure & Reform* 141 152 176 178 506
Other departments 67 70 70 70 210
Office of Public Works Incl Incl Incl Incl Incl
Transport, Tourism & Sport* 1,075 1,129 1,281 1,328 3,738
Contingency 200 500 1,034 1,534
Total Gross Capital Expenditure Ceilings* 4,167 4,534 5,291 6,069 15,894
*Rounding affects totals
Annual Percentage Increase 8.8% 16.7% 14.7%
Percentage Increase on provision in previous budget 14% 25% 8%
Source: Budget 2017, Department of Finance.
the current housing crisis. Meanwhile, in July 2016, €5.35 billion has been authority house completions coming
the bulk of increased expenditure earmarked by the government to build to a virtual standstill in 2015, at only
for subsequent years is being held 47,000 units by the end of 2021. This 75 units. Generally, there is a one-year
in contingency provisions, such as is a very welcome and a much needed lag between commencement trends
€1,034 million in 2019. investment. However, it won’t solve becoming completion trends. Thus,
the supply problem on its own, and the recent upsurge in housing projects
Residential we will need significant private sector across the ROI should see completed
The residential sector crisis has been residential developments to see real housing units increase by double digit
many years in the making, and will take change in the market. percentage growth in 2017, from
many years for the government and the low baseline however of around
country as a whole to fully address. Figure 2 below clearly illustrates the 14,000 units.
Since the crash in 2008, the drop in scale of the housing decline, with local
the construction of private and public
residential units has precipitated the
Figure 2
crisis to a point where rents are soaring.
House commencements and completions
In Ireland’s main urban centres, there
Source: Department of Housing, Planning, Community and Local Government
are thousands of homeless (persons
with no accommodation in which
100,000 5,000
they can reasonably occupy/remain
in occupation) in hotels and similar 90,000 4,500
accommodation. The lack of supply 80,000 4,000
is also starting to hit Dublin’s ability 70,000 3,500
to attract international investment, as 60,000 3,000
companies are concerned their staff
50,000 2,500
will have inadequate housing.
40,000 2,000
The launch of Rebuilding Ireland 30,000 1,500
– Action Plan for Housing and 20,000 1,000
Homelessness saw concrete measures 10,000 500
being put in place to rectify some of
0 0
ROI’s housing problems. Launched
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
House House Local authority house completions
completions commencments (Right axis)
AECOM 9AECOM Ireland Annual Review 2017
The recent minor changes to ROI’s companies are increasingly looking will likely lead to further investment and
central bank rules for mortgage lending to invest further afield. While we are expansion. These developments, along
will help the first-time buyer market. beginning to see some commercial with centres such as Kildare Village and
However, it is too early to say whether activity outside of Dublin, the problems others in regional urban centres with
rent cap measures introduced in experienced in Dublin in 2014-2015 expansion and refurbishment plans will
December 2016 will result in further are being felt in other cities, such as see a return to capital expenditure in a
landlords exiting the market or Galway, where the shortage of supply is sector which has been sluggish
discourage others from building new proving a real constraint on attracting to recover.
accommodation. In our Review 2017 new foreign direct investment
survey, respondents ranked significant companies of scale. The changing trends in retail, such as
increase in government house building increased online shopping, click and
programme, PPP house building Industrial collect services and the option to watch
programmes and further tax incentives/ With the upturn in the economy, a movie, or eat out as part of the more
changes for private housing (in that demand for space has been good. traditional shopping experience, will
order) as the three most significant However, the level of surplus stock undoubtedly impact on investment
actions the government could take from the pre-crash era and normal decisions and are likely to lead to a
to address the current housing crisis transactions in the market mean there focus on spend in these areas.
– action in this regard needs to be has been no real significant speculative
accelerated as a priority. new builds; construction has largely Tourism, sport and culture
been related to existing occupiers The tourism sector had another good
Commercial market expanding or re-purposing existing year in 2016, with overseas visitors to
Following significant concerns operations. the ROI up 11 per cent in the first 10
since 2014 around the shortage months of the year, compared to the
of office space in Dublin, and the IDA Ireland has been developing same period in 2015, and up 37 per cent
city’s inability to meet the needs of a number of advance-technology compared to the same period in 2013.
foreign direct investment, we have buildings in regional locations, including Similarly to previous years, transactions
seen significant change in 2016 with two currently nearing completion continued across the sector, with hotel
a number of schemes delivered and in Castlebar and Sligo. These types groups acquiring leaseholds on existing
under construction for completion of initiatives are very positive and, hotels a notable trend. With a number of
in 2017 and 2018. Despite these coupled with strong marketing to schemes obtaining planning permission
improvements, it is anticipated that the publicise them, have been successfully for Dublin city centre, transactions,
continuing strong demand for offices attracting significant investment expansion plans and general strong
will see the commercial office sector and providing welcome activity in performance will see continued
boom continue across the Dublin the sector. construction activity across the sector
market, particularly in the city’s centre, in 2017.
where the commercial market’s Retail
many tower cranes are visible across There have been a number of Fáilte Ireland, the National Tourism
the skyline. significant sale transactions in the Development Authority, continues to
Dublin retail shopping centre sector invest in strong tourism initiatives. With
With high commercial rents in Dublin in 2016, such as Blanchardstown and the huge success of the Wild Atlantic
and related housing shortages, Dundrum shopping centres, and these Way launched in 2014, and Ireland’s
Daughters of Charity St Vincent’s Centre,
Navan Road, Dublin 7.
AECOM services: Cost management.
Image courtesy of Stephen Farrell Photography.
10 AECOMAncient East, which really took off In addition, the Pound recovered continued strong growth in industry
in 2016, is set to capture people’s somewhat against the Euro in late output as highlighted earlier, would
imagination and lengthen the tourist 2016. Thus, we expect construction point to 2017 seeing a continued trend
season. cost inflation to remain modest in in tender price inflation increasing. That
2017. However, allowing for further said, it is important that this gap is not
The re-development of Pairc Ui volatility in the market, and some seen like the speed limits on our roads,
Chaoimh, which got under way in 2016, modest labour cost increases a target to aim for, instead it should
represents significant investment in the in certain trades, we anticipate be a maximum limit and we should
country’s south west. Meanwhile, at the construction costs to increase by take our time getting there because
opposite end of the Island, the Windsor around 2.5 per cent in 2017. maintaining competitiveness is critical
Park re-development was completed in to the economy and in terms of
Belfast. We all await the decision at the Tender prices competing on the international stage in
end of 2017 on the Rugby World Cup Tender prices have come under attracting inward investment.
2023 bid. increasing focus in 2016 as the
squeeze on available resources In the AECOM 2017 Review Survey.
Construction costs and becomes more acute and the conducted as part of the research for
tender prices inevitable acceleration in tender price our 2017 Annual Review, we sought
Competitiveness continues to be increases. It is useful to look at tender opinions from respondents on their
an important growth driver in the price movements, given that they expectations in respect of tender
economy, with construction playing peaked at the end of 2006-beginning price movements in 2017. Based on
a part in keeping costs down. Tender of 2007, to see where we stand relative this feedback and our own analysis
price increases have, however, been to that time. Figure 3 below illustrates of the above factors we anticipate
increasing year on year, at levels over 5 the significant falls in tender prices in that 2017 tender price inflation will be
per cent since 2014, raising concerns the years immediately following the approximately 6 per cent in the regions
that this will lead to an erosion of financial crash and tracks the recovery and approximately 8.5 per cent in the
competitiveness. We review 2016 since then. greater Dublin area. As always, these
trends and look ahead to anticipated are averages and variances will be
price movements in 2017 below. It is noticeable that despite the high experienced across regions, projects
levels of tender inflation increases scales and sectors. Specialist trades,
Construction costs since 2014 there still remains a where resources are constrained,
Inflation across the economy has noticeable gap to the equivalent may experience higher tender
remained at historically low levels cumulative construction cost index price increases.
with the Consumer Price Index (CPI) tracker. This gap and the likely
at well below 1 per cent per annum
increases. Similarly, construction cost
Figure 3
increases have been very constrained
AECOM and SCSI tender indices and SCSI construction cost index
over the same period. The Society of (Cumulative %, 2006 – 2017)
Chartered Surveyors Ireland (SCSI)
construction cost index has recorded Source: AECOM and Society of Chartered Surveyors Ireland (SCSI)
an 11.5 per cent increase in costs
from September 2006 to September 10%
2016. There is undoubtedly a range
of factors for this similar to the rest of
the economy, including constrained 0%
labour rates, international construction
material costs and for periods, the
-10%
strength of the Euro against the Pound.
Given the international uncertainty
arising from Brexit and Trump’s -20%
presidency, it is difficult to assess
likely cost trends, as markets can
react suddenly to policy statements -30%
from any of the major economies. We
have seen energy costs increase in
late 2016 as The Organization of the -40%
Petroleum Exporting Countries (OPEC)
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 (p)
2017(f)
announced the first cut in production in
eight years at the end of November.
SCSI Cost index SCSI Tender index AECOM Tender index
AECOM 11AECOM Ireland Annual Review 2017 The disadvantages of leaving the EU, and potentially the single market, have been well documented; however, we should be focusing on the potential advantages. Could NI become a natural gateway between the EU and the UK financial services sector? National Football Stadium at Windsor Park, Donegall Avenue, Belfast, Co. Antrim. AECOM services: Mechanical and electrical consultancy, civil and structural engineering. 12 AECOM
Industry review:
Northern Ireland
AECOM 13AECOM Ireland Annual Review 2017
Key statistics at a glance
NI overall construction output (£m) Construction output value change;
H1 2016 ‘V’ H1 2015
4,000
20%
3,000
15%
2,000 10%
5%
1,000 0%
-5%
0 -10%
Housing
Infrasturcture
Other public
Other private
2007 2009 2011 2013 2015
£3,424m £2,952m £2,295m £2,142m £2,573m
NI construction output: new work 2015 (£m) Overall construction output H1 2016,
broken down into new work and repair
and maintenance
Miscellaneous
£137 Repair and maintenance
(24.9%)
Offices/retail
£70
Industrial
£85
Entertainment
Housing
£147
£642
Education
£145
Health
Infrastructure
£198
£470
New work
(75.1%)
Source: Department of Enterprise, Trade & Investment, Construction Output Statistics
14 AECOMNorthern Ireland
In Northern Ireland (NI), Brexit is first six months of 2016 increased by £105 million leisure transformation
a big topic of conversation, with 4.5 per cent compared to the same programme and the executive are
much debate around the potential period in 2015. The shortage of releasing a fresh tranche of school
consequences for the economy. It Grade A commercial accommodation replacement projects.
is important that we plan for how we in Belfast that we reported on in
see NI fitting into whatever economic 2016 is still a problem, and possibly We are hopeful that the recently
model comes out of Brexit. But, as worsening in the short-term. However, mooted ‘golden age’ of infrastructure,
most commentators are now saying, it councils, landowners and developers which the Westminster government is
is too early to know how NI’s economy have started a number of schemes promoting, will bring benefits to NI in
and political institutions will manage to throughout Belfast. Many of these are the long run.
make due to become available at the end of
Brexit work. 2017 or 2018 and will go some way to Across NI, plans for a third runway
alleviate the shortfall. at Heathrow are seen as a welcome
The disadvantages of leaving the EU, development. NI will need to become
and potentially the single market, have There are also a number of hotel and more outward looking if it wishes
been well documented; however, we student accommodation projects well to grow, with strong connectivity to
should be focusing on the potential underway, with a significant number Heathrow — one of the world’s major
advantages. Could NI become a natural of additional developments in the hub airports — essential. The NI
gateway between the EU and the UK planning process. government has realised this, and has
financial services sector? provided financial assistance to retain
2016 was the first full year of the key routes in and out of NI.
The Irish government has been quick planning process being devolved
to point out the virtues of Dublin from a centralised agency to the local Despite the ongoing economic and
becoming a partner to the UK financial authorities and, anecdotally, decisions political uncertainty, the outlook for
sector and there are many practical are being made in a timelier manner. the construction industry for 2017
advantages of doing so, such as The new councils have bedded in and is continued, modest growth. Tender
ease of travel, shared time zone and their infrastructure plans are beginning price inflation of around four per cent is
language, and cultural similarities. This to move. Notably, Belfast City Council anticipated as the labour market shows
leaves NI in a unique position, with a has commenced investment in their signs of shortages in key trades, with
lower cost-base, an exceptional talent the reduced value of sterling possibly
pool and the highest satisfaction rating leading to inflationary pressures.
within the UK for residents, to attract
and build a financial services industry,
bridging the two economic zones. The
only certainty, however, is that Brexit
has created uncertainty at a time when
NI is just getting back on its feet.
The construction industry has had a
relatively stable year and some modest
growth with the value of output in the
Northern Ireland Water Resevoirs,
Middle South Woodburn, Carrickfergus,
Co. Antrim.
AECOM services: Reservoir safety advice, site
inspections, refurbishment design, procurement,
NEC project management, supervision, planning
and environmental approvals.
AECOM 15AECOM Ireland Annual Review 2017 “Even when the UK government finally triggers Article 50, we will still not know for a couple of years how those negotiations will play out. This creates uncertainty, which isn’t good for business.” Angela McGowan, Regional Director, CBI NI “The biggest challenge facing Irish business is lack of investment, particularly public infrastructure investment. It is clear that Ireland is now experiencing what the economist Galbraith described as “private affluence and public squalor.” Danny McCoy, CEO, Ibec Endoscopy Unit, Roscommon Hospital, Roscommon. AECOM services: Cost management. 16 AECOM
Business
intelligence
To assist in understanding the wider economic
and political context in which the construction
industry sits, and to picture some of the different
perspectives, we have spoken to key industry
leaders for their thoughts on major questions.
AECOM 17AECOM Ireland Annual Review 2017
Angela McGowan
Regional Director, Confederation of British Industry (CBI) NI
You’ve just taken up the post of don’t realise that most of the funding How does CBI NI see Brexit
regional director with CBI NI. towards the National Health Service impacting the NI economy generally
What attracted you to the role and and the education sector comes from — and more specifically — on the
what is it that you hope to achieve business taxation. I am hoping to raise property and construction industry?
in Northern Ireland (NI) in the that awareness going forward.
foreseeable future? Even when the UK government
What does CBI see as the biggest finally triggers Article 50, we will still
I previously worked in Danske bank challenges facing NI businesses as not know for a couple of years how
as Chief Economist for the last eight we head into 2017? those negotiations will play out. This
years and have well over 20 years’ creates uncertainty, which isn’t good
economics experience, so I think Obviously, the biggest challenge is for business. Therefore, it is really hard
economic policy is now in my DNA. the uncertainty stemming from having to say how this will go and how it will
As the UK embarks on leaving the to redefine our role in Europe. In this affect each sector: no one really knows
EU, this is arguably one of the most region, we need to make sure our how it will pan out. We do expect that
vulnerable times for the local economy voice is heard loud and clear because to impact upon business investment
so I am more than happy to take we have very unique circumstances levels. For property and construction
the lead in terms of ensuring policy in terms of our land border and our though, there is a positive, as we are
makers are aware of the challenges extensive trade with the ROI. expecting the Autumn Statement to
for local business. I am keen to recognise the need for fiscal stimulus
ensure that innovative solutions to Not everything is Brexit related in terms in this uncertain time. Admittedly,
our challenges can be found. I am of challenges to industry in 2017. The even before the EU referendum, the
absolutely committed to getting the apprenticeship levy is a big one: it is not UK government was starting to put
best economic outcome for the people really suited to many local companies infrastructure at the heart of its policy
of NI and I will work continuously and and as yet there is little clarity around and recognising that they need to
tirelessly towards that goal. how it will work. A number of local firms invest. Indeed, there is no better time
will be making large payments with this to invest with interest rates so low. The
When I was considering the Regional levy and they want to ensure that in impact on property is hard to call as
Director post last summer, I remember return they will receive adequate funds there are so many variables influencing
that the more I explored the CBI as an for appropriate in-house training and this market – supply of housing, credit
organisation, the more I liked it. There is skill development. Also, we always have availability, sentiment and the jobs
a huge volume of work that goes on in ambitions to make NI a knowledge- market. Currently, the housing supply
the background in the CBI that I think is driven economy, and that requires in NI is still not matching demand;
an untold story in NI. This organisation research and development (R&D) however, the supply problem here is
is committed to raising prosperity and innovation. Although the existing mild compared to Great Britain
and living standards across all UK R&D tax system has been improved or Dublin.
regions. One particular CBI campaign, in recent years, it does not fully
‘The Great Business Debate’, is all cover pre-commercialisation activity, How do you feel Brexit will impact
about raising the awareness of the such as clinical trials or other pre- the relationship — economic or
contribution that business makes to production development activity. The otherwise — between NI and
the country’s living standards. Our CBI has therefore been pushing for a the ROI?
overall prosperity is linked to business ‘supercharged’ use of R&D tax credit to
success but many people do not incentivise that pre-commercialisation The ROI is our biggest trading
even consider that. Indeed, people activity that takes place across the UK. partner. Thirty-eight per cent of our
18 AECOMmanufacturing exports, around €1.8 billion, go to the ROI while we import around €1.2 billion from the ROI. Many of our members see themselves as all-island businesses and are deeply imbedded in the all-island market in terms of supply chain and distribution. If you talk to sectors about this (for example the agri-food sector) it is so important for them that these trading links are maintained, so that is what we will be working towards. The two economies on this island have worked very closely, increasing the economic returns for everyone. Therefore, it doesn’t make any sense to alter that. I do believe that for businesses and energy markets, we will need some form of flexible arrangements that allow for continued collaboration across the island. How important is Foreign Direct Investment (FDI) to the NI economy, and how can we attract more? FDI is critical, but I always say that we small-firm dominant economy. FDI are opportunities through technology. should try and grow the private sector firms tend to be the most successful I firmly believe that technological with a three-pronged approach. In and therefore bring with them better connectivity is an opportunity which the first instance you need strong management skills, higher productivity will allow a small region like ours, which levels of entrepreneurship for new levels and technology transfer. They is geographically quite isolated, to sell firm formation. Secondly, scaling up also have a multiplier impact on the ourselves and be relevant on the global indigenous companies is crucial: we economy by using local supply chains stage. Infrastructure and connectivity have a small firm-based economy so their importance should never be go hand in hand. When we are well in NI so businesses need help with underestimated. connected through roads, rail, airports exporting, raising innovation levels, and broadband, NI has a much higher brand development and protection of In terms of what more NI can do, you chance of being an economically intellectual property. The third prong just need to look at what investors successful region! for growth is of course FDI, which want: they want high levels of skills, has always been seen as key to job good infrastructure, access to creation. In particular, for NI, it is about markets etc., so we need to make bringing in firms of scale because, sure that we have these things. NI is a as mentioned previously, we are a peripheral region no doubt but there AECOM 19
AECOM Ireland Annual Review 2017
Danny McCoy
CEO, Irish Business and Employers’ Confederation (Ibec)
What does Ibec see as the biggest controlled migration to bring and Ireland are actually two hubs of
challenges facing Irish businesses that about. globalisation, a phenomenon which I
as we head into 2017? think will continue to be a trend through
The November 2016 High Court ruling, 2017 and 2018 regardless of how
The biggest challenge facing Irish currently under appeal, does give Brexit and the EU relationship goes.
business is lack of investment, Theresa May options. If she didn’t want While that seems to be a ludicrous
particularly public infrastructure to be stuck in the hard Brexit option idea now, given that we haven’t even
investment. It is clear that Ireland and was doing it for tactical reasons, completed our motorway system, it is
is now experiencing what the it does give her some room. However, important to have ambition.
economist Galbraith described as one way or another, the UK will be
“private affluence and public squalor”. leaving the EU as it exists today. The When we look across the regions,
Squalor may be too strong a word question is: can the EU adapt to be the issue of the orbital network does
for Ireland right now but it’s a danger inclusive of the UK in the future? That is come back to bear. We seem to be
unless we ramp up investment. the absolutely crucial piece for Ireland. lacking ambition to connect up our
There is a strong surge in disposable An EU without the UK in a hard Brexit two biggest cities outside of Dublin;
income growth, companies are also scenario is a disaster for Ireland and Limerick and Cork. There is an attitude
investing significantly in machinery anything brought forward as a positive that the population is not in the west,
and equipment, while building and is merely mitigating some losses. it is in the east, so why would you build
construction investment is a bit But, we don’t need to be completely infrastructure over there? Clearly, the
lagged but it is coming through. negative about it - there will be a future. infrastructure deficits are manifest in
Where we have pinch points in public Having 95 per cent of what you had more than just in roads but these are
infrastructure, it is not because of last year always feels bad but when you actually population-related deficits.
the want of money, it is for the want are wealthy, 95 per cent of a wealthy
of ambition, in terms of using public position is quite a strong one. The increasing public sector
private partnerships to get around the industrial unease in 2016 could lead
EU fiscal rules constraints. One of the positive legacies of the to industrial action in 2017. How
Celtic Tiger was the improvement can businesses balance the need
How does Ibec see Brexit impacting in the motorway network. Are to maintain the competitiveness
on the Irish economy generally there still significant infrastructure that was gained through necessity
— and more specifically — on the deficits? during the downturn, and still fairly
property and construction industry? reward employees?
One of the things Ibec champions is
Clearly, the Brexit issue is going to a connected island of Ireland with 10 Clearly, our competitiveness will
be massive for Ireland as the “hard million people, within a generation, and decline over the next number of
Brexit” position from the British Prime the completion of the orbital motorway years because we have been super
Minister suggests controlled migration system would be a very significant competitive as a result of the crisis.
is the primary objective and the boost to connectivity. We had a huge swing towards
subordinate ambition is for EU single productivity and cost maintenance
market access. We would have wanted I also think we should have an ambition and that will have inevitably started to
it the other way round and would have to build a tunnel between the two unfold. The difficulty is now to ensure
supported Britain getting maximum islands of Ireland and Britain. This this unfolding is done smoothly,
single market access, and we might would be significant and achievable particularly in the public sector. There
have had to countenance some for both countries, because Britain is an understandable expectation from
20 AECOMpublic sector workers to try to restore their pay because the recession is over. There will be a need for a new public sector pay agreement as the Lansdowne Road Agreement is unlikely to last. The question is: can we absorb the costs in line with the same trend in which our productivity is increasing? Are there any initiatives which the government could explore on the property/capex side which would encourage Irish companies to invest and expand existing operations? On the property/capex side, I think the government could use more private initiatives. In fact, Ibec has been pushing an SSIA-type scheme relating to recur. That is a lot of money from our to property and infrastructure, which business model which is not getting is a mechanism to allow the private recycled back in because we only put sector instead of just getting tax cuts an extra billion in the budget. for possibly conspicuous consumption to actually use that money to the Finally, how do you see the American benefit of people, by bonds related to presidential election result infrastructural projects etc. impacting Ireland? The difficultly is getting the cash flows I think it could have very significant out of the construction projects, problems because the thing that I think there are ways around this makes me confident about Ireland is challenge with some initiatives. I think globalisation, and globalisation is what the government has lacked ambition has made the UK and Ireland two great in trying to find innovative ways around economies in the last generation. I confronting our problems. For instance, fear a Trump presidency may reverse a lot of people say the GDP figures those positive forces of globalisation, of 2015 are just a mirage. One could as they benefit us. My fear is not that argue they involve intangible assets, Capitol Hill will suddenly become which by their nature, may be mirage- very effective at corporate taxation like, but there is clearly a reality that decisions, but the whole tenor of the corporate tax revenue in 2015 was momentum on globalisation turning expected to be €4.3 billion and came in back into a nationalistic approach must at €6.8 billion. That is €2.5 billion extra, be the greatest fear for a small, open and is recurring; at least it is predicted economy. AECOM 21
AECOM Ireland Annual Review 2017
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One Park Place, Hatch Street Upper, Dublin 2.
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Geographies
AECOM 23AECOM Ireland Annual Review 2017
Ireland
Construction activity in the ROI and significant new developments may be required in partnership with
outside of Dublin has been strong by Clarendon, currently at feasibility the Institute of Technology Tralee. It is
throughout 2016, but growth has stage, including CIE’s Horgan’s Quay anticipated that the HSE will continue
been slower overall compared to land and Wilton Shopping Centre. to develop the Irish Blood Transfusion
the capital. A combination of public Meanwhile, O’Callaghan Developments Services building and Paediatric
sector capital spending and foreign has secured planning permission Inpatient Accommodation on the Cork
direct investment is, however, for a significant office development University Hospital site. Significant
providing a solid workload, and there on Albert Quay. The pharma sector, Office of Public Works expenditure on
is potential for increased activity too, is expected to grow in 2017, with flood protection measures is planned
in the private sector with greater reinvestment on existing campuses along the River Lee corridor in the city
demand and funding availability for such as Eli Lilly, Johnson & Johnson, centre and west of the city.
construction projects.
U.S. Army Base Camp Carroll
Bio Marin and General Electric’s new
campus development. With traffic in In 2017, Cork City Council looks set to
Cork and the southern region and out of Ringaskiddy beginning to develop a new Local Area Plan (LAP)
Construction activity in Cork has reach breaking point, calls to upgrade and development strategy for the
definitely turned a corner: we may look the N28 road to Ringaskiddy and South Docks, with plans to redevelop
back at 2016 as being a pivotal year for Dunkettle interchange have come to the Tivoli Docks. In 2016, Cork reached
growth in Cork’s construction sector. the fore — we all want to be on the an important milestone with the
Tower cranes returned to the city, with road to recovery, but don’t want to sit in publication of a Cycle Network Plan.
many large projects commencing, traffic while trying to get there. Building on the success of the public
including the Court House; Capitol bike hire scheme, the LAP will guide
Cinema; Pairc Ui Caoimh; Cork City Throughout 2017, we expect public the future development of the cycling
North West Primary Care Centre in St capital expenditure to form the network within the metropolitan area
Mary’s Health Campus; Bon Secours foundations for further growth in the to encourage people to cycle to work
Hospital North Block; UCC’s Student construction industry. Going forward, and school, and for general recreation
Hub; and various school projects. University College Cork has bold and leisure. On the residential front,
plans, including the development of it is positive to see that planning
Looking ahead, Cork’s commercial the Cork Science and Innovation Park, permission has been granted for
development is set to grow even a new sports centre, student hub and around 300 houses in Carrigaline,
more, with John Cleary Developments planned student accommodation. Cork with further applications expected in
continuing to take a lead role in the Institute of Technology may seek to Monkstown and Passage West.
city’s growth through plans for a refurbish their strategic building on 46
mixed-use development in Mahon, Grand Parade and new developments
Hollyhill Library,
Cork.
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24 AECOMMid Western Hospital Critical Care Unit,
Limerick.
AECOM services: Cost management,
employers representative
Image courtesy of Ros Kavanagh Photography.
Limerick and the mid-west region
To borrow the words of 2016 Nobel
Laureate, Bob Dylan, recovery in the
ROI’s mid-west is ‘like a slow train
coming’, with construction activity
across the region showing discernible
improvement throughout 2016,
generating considerable optimism that
workloads will increase in 2017.
Development of the region’s
technology parks continues with the
construction of new office spaces
and industrial facilities, notably at
the Regeneron facility at Raheen
Business Park. Other major projects
of note under way at the end of 2016
included the new courthouse, major
refurbishment of the Adare Manor
and the continued Northern Trust
development: there are a lot of reasons
to be positive about the future. The education sector is a major 2030 masterplan, is in design stage.
contributor to construction activity Looking to the healthcare sector, the
In autumn 2016, Limerick City in the mid-west, with work ongoing next big developments include a new
Council launched the Limerick 2030 at a number of schools, including St ward block and maternity hospital at
Designated Activity Company (DAC), Paul’s in Limerick and Ennistymon Limerick University Hospital
which is tasked, in the first instance, Community School in Clare. Three
with delivering over €500 million large new secondary schools at The private sector is also showing
of transformational investment Clare Street, Mungret and Castletroy increasing signs of activity, with plans
infrastructure across four strategic in Limerick, are at various stages of lodged to build a €40 million, 15-storey
sites in Limerick City. Enabling works planning and design, as are a number building on the riverside at Howley’s
on one of these projects, the Hanging of primary schools. In the third level Quay. The scheme currently includes
Gardens site on Henry Street, was education sector, University of Limerick 150,000 square feet of office space,
already under way at the end of 2016, continues a strong programme of 45 luxury apartments and commercial
with the Opera Site Masterplan set capital works with their pool and arena space. In the retail sector, the
for planning submission in 2017. Both nearing completion at the end of 2016, Crescent Shopping Centre is currently
developments will provide much- with the university’s library expansion undergoing a major expansion and
needed large scale modern office underway and new student centre and facelift, adding 3,384 square metres
space in the city. Limerick City and pitches development entering design of floor area. The LIDL Childers
County Council is also delivering stage. Meanwhile, refurbishment of Road store is also set for €4 million
three housing projects: Churchfield Mary Immaculate College’s Mount redevelopment.
in Southill, Lord Edward Street and St. Vincent building is ongoing and
Hyde Road. Meanwhile, the private their new library at design stage at While these developments are good
residential market is gradually the end of 2016. Limerick Institute news, should construction continue
recovering; many of the developments of Technology’s Coonagh Cross to grow, anecdotal evidence suggests
that stalled during the financial crash development is in planning stage the industry is facing a skills shortage,
are being completed, with small, new and the Community Engagement which could pose a threat to meeting
developments coming on stream. Gateway project, part of LIT’s Campus future demand.
AECOM 25AECOM Ireland Annual Review 2017
Galway and the western region However, a number of judicial reviews project in 2018 providing improved
The construction industry in Galway have since been granted by the connectivity. Other PPP projects active
and Ireland’s western region has been High Court in respect of the An Bord in the region will see six primary care
restricted by a certain inelasticity of Pleanala grant of permission, which are centres — Tuam, Westport, Ballinrobe,
supply across the development sector due to heard in the Commercial Court Claremorris, Ballymote and Boyle,
since the downturn in 2008. A number in early 2017. and a new courthouse —Letterkenny,
of factors are constraining the supply- completed in the second half of 2017.
side from responding to potential and In the housing sector, the lack of
real demand, with the most significant new-build stock is a concern and, in While we have seen a number of
factors likely to be the availability of common with other urban centres, hotel transactions across the region’s
funding with achievable terms, and the Galway has seen double digit rent hospitality sector since 2011, there has
availability of suitable development increases in 2016, undoubtedly been very little additional capacity. With
sites and investors. driven by a lack of supply. Of course, the continuing success of Ireland’s
there is a range of sub-sectors in the Wild Atlantic Way tourism trail, backed
Galway city has developed a strong residential accommodation market by significant investment from Fáilte
foreign direct investment presence and, in this regard, the proposed start Ireland, and with Galway being voted
over many years and indeed these of the National University of Ireland Ireland’s European Capital of Culture
companies are continuing to re-invest Galway’s on-campus, 429-bed student 2020, we expect further growth in the
in their facilities. However, Galway’s accommodation scheme in early 2017 sector. Across healthcare in 2017,
commercial sector continues to have will be a very welcome development. we expect to see the Bon Secours
a low vacancy rate and, as a result, it is The public sector continues to be the complete their €6 million investment in
likely that it has lost new investment to backbone of construction spend in new cardiac catheterisation laboratory
other regions. the region, with the school building (cath lab) facilities in Galway as part of
programme an important component. their 2020 plan. Similarly, the region’s
The proposed Apple development in HSE has a programme of projects
Athenry is the single biggest planned As highlighted elsewhere in this in the pipeline, including cath labs in
investment in the region, and has the review, the provision of physical University Hospital Galway, Galway city
potential to significantly boost local infrastructure is vital to development ambulance base in Merlin Park and
construction employment. Apple and growth within any region, with the a 90-bed community nursing unit in
obtained planning permission for completion of the M17/M18 Gort to Carrick-on-Shannon.
the €850 million data centre in 2016. Tuam private-public partnership (PPP)
Left:
NUI Galway Lambe Insitute for Translational Research
HRB Clinical Research Facility,
Galway.
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employers representative.
Image courtesy of Neil Warner Photography.
Right:
UCD Ashfield Student Residence,
Dublin 4.
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Image courtesy of Donal Murphy Photography.
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