Review AECOM Ireland Annual Review 2016
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
review AECOM Ireland Annual Review 2016
Oweninny
Cover Wind Farm,
photo:
Bellacorrick,
Lagan Co. Mayo.
Weir Bridge,
Donegall Quay, Belfast.
AECOM services: Landscape architecture, digital media.
AECOM services: Architecture, civil and structural
engineering, mechanical and electrical consultancy,
resident engineering, cost management.
Image courtesy of Rory Moore Photography.
AECOM Ireland Annual Review 2016 Introduction 3 Industry review: Republic of Ireland 5 2015 performance and medium term outlook 7 Sector performance 8 Construction costs and tender prices 11 Industry review: Northern Ireland 12 Business intelligence 15 Martin Shanahan, CEO, IDA Ireland 16 Professor Neil Gibson, Director of the Ulster University Economic Policy Centre 18 AECOM Ireland profile Geographies 21 Ireland 22 UK market focus: A change of mood 26 Thought leadership 28 Procurement strategies: Think before you leap 30 Congestion relief requires public transport investment 32 The changing workplace 34 Indicative building costs 36 AECOM 37 AECOM Ireland 38 AECOM 1
AECOM Ireland Annual Review 2016 Capital Dock, Sir John Rogersons Quay, Dublin 2. AECOM services: Cost management, environmental services. 2 AECOM
Introduction
2016 — New business dynamic
accompanies robust recovery
Last year was good news for capacity issues will be dependent delivers innovative solutions that
Ireland’s economy. With the low on returning emigrants, a new wave improve lives.
euro continuing to boost the export of European migrants, and tier two
market, the Republic of Ireland’s contractors rapidly increasing their In Ireland, we are now over 600-strong
(ROI) economy grew by around six resources and output. Successful with the full range of skills to support
percent, making it the fastest growing Northern Ireland contractors who Ireland’s booming economy — from
economy in the European Union for have expanded into Scotland and the outset of the planning and
the second year running. It means the rest of the UK may also consider environmental aspects of projects,
the ROI economy has reached pre- redirecting some of their efforts back through to design and construction.
recession growth levels, with the to Ireland. Constituent parts of the business
strongest growth focused in the have a deep history here, with the
Greater Dublin Area. The Republic of Ireland government project and cost management
can be congratulated for managing business having its origins in
Northern Ireland’s economy in the economy to the current point. Patterson Kempster & Shortall,
the same period also grew by two However, there still remain significant who were already over 50 years old
percent. Of course still good, but deficits in social infrastructure; none in 1916 and were involved in the
whilst it would appear that the rising more prevalent than that of housing. reconstruction of O’Connell Street in
tide is lifting all boats, the disparity In this sector, there has clearly been a 1917. Today, we continue to work with
between regions is clear. lack of foresight, hence the need for some of the island’s most ambitious
swift implementation of the recently and forward-looking clients, helping
This continued surge in growth in announced policies and programme to cut through complexity, and
Dublin and across the Island of Ireland for delivery. transform the communities in which
means that those looking ahead at we live and work.
procuring projects in 2016 can expect In Northern Ireland, the recent
rising tender prices and shortages agreements in the assembly are Here’s a slice of what we’ve been
of resources in certain areas. In positive and should trigger the release doing over the last year and analysis
fact, many specialist contractors in of a number of social infrastructure of some of the key trends. Let’s now
façades, steel and concrete already projects as well as investment look forward to what will hopefully
have their books full well into 2016. prompted by the proposed reduction be another promising year for the
in corporation tax. industry. Our sleeves are rolled up and
For the survivors of the worst we’re ready to go.
recession in living memory the Built to deliver a better world, it
appetite for renewed growth is has also been a year of growth for John O’Regan
definitely present, but this time the AECOM — we are now the world’s Programme, Cost, Consultancy Lead,
approach to risk will almost certainly No. 1-ranked engineering design Ireland
be different. It may also be difficult firm*. Experts in all phases of the
for tier one contractors to deliver the development lifecycle — design, build, john.o’regan@aecom.com
likely number of major projects, with finance, operate and manage — the
large international contractors still diversity of our capabilities and global *According to Engineering News-Record
drawn to the vibrant London market. network of 85,000 professionals 2015 rankings.
The short-term solution to these
AECOM 3
AECOM Ireland Annual Review 2016 4 AECOM
Institute for Lifecourse and Society, NUI Galway, University Road, Galway. AECOM services: Project management, cost management and employer’s representative. Image courtesy of Neil Warner Photography. Industry review: Republic of Ireland AECOM 5
AECOM Ireland Annual Review 2016
Key statistics at a glance
Construction output breakdown 2015 Non-residential planning permission
AECOM estimates (€m) granted July 2014–June 2015 (‘000 sq m)
Source: Central Statistics Office
5,000
Commercial
4,000 buildings (306)
3,000 Buildings for
agriculture (594)
2,000
Industrial (275)
1,000
Government,
health and
education (399)
0
Civil Social Private
Other buildings
Residential engineering infrastructure non-residential
€5,000m €3,250m €1,500m €2,500m for social use (68)
Employment in construction sector House completions
Domestic construction workers and January-September 2015
non-domestic construction workers Source: Department of Environment, Community
& Local Government
Source: Central Statistics Office
Domestic
Non-domestic
226,100
Private housing
8,668
110,600
Social housing
47,800 246
15,300
Total 8,914
Peak (Q2 2007) Current (Q2 2015)
Total: 273,900 Total: 125,900
6 AECOM
2015 performance and medium-term outlook
The sporting analogy of ‘a game of two of entities considered capable of - The residential property market
halves’ could possibly be applied to the delivering on projects of this nature has come under significant strain,
construction industry in 2015; however, and the resultant tendering in a particularly in the greater Dublin
whilst it is most commonly used to restricted list. During the downturn area, and throughout the year
describe two periods of contrasting a considerable number of the larger the pressure has also mounted in
fortunes, its application here is of a organisations went out of business respect of social housing.
more subtle nature. and others scaled back significantly,
thus the willingness and ability to ramp In summary, confidence has returned
We saw the industry gradually return up will undoubtedly be a factor in the to the construction sector and
to growth in 2014 after the dramatic coming years. economy generally as evidenced
drop between 2007–2011 and this by the Ulster Bank Construction
growth pattern has continued in In Figure 1 we see double digit growth Purchasing Managing Index Report,
2015. We would estimate the value of in output in the last couple of years and whose October results indicated
construction output to have been circa it is anticipated to continue in 2016. a sharp increase in new business
€12.25 billion in 2015, a 14 percent rise Whilst employment has also increased which was central to improvements in
on 2014. strongly, it can be seen that it is less activity, employment and confidence.
volatile. There is a risk, and some signs However, our note of caution in last
However, whilst the first half of 2015 in the last 12 months, that if this lack year’s Annual Review — that the upturn
continued in a similar manner to of equilibrium continued or widened, it has been concentrated in the greater
2014, we started to see some stress may cause a spike in tender prices. Dublin area — continues to hold true.
fractures appear in segments of the Notwithstanding this, we have seen the
industry during the second half of Two key developments in 2015 beginnings of recovery in the regions
the year. In particular, a number of included: with an increase in the number of
capacity concerns have arisen in enquiries, along with previously shelved
the Dublin market which in turn can - The Office of Government projects being revisited. This all bodes
have a knock-on effect nationally. Procurement (OGP) instigated well for 2016 and beyond.
Curtain walling and façade system consultations with industry in
specialists would appear to have very respect of the Public Works
strong order books arising from the Contracts (PWC) and the
increase in commercial and multi- proposed interim measures to be
storey residential schemes which implemented in the near future.
are on site or have obtained planning
Figure 1
permission. Combined with similar
Change in tender prices, and construction output
demand pressures internationally, the and employment (%)
impact can be programme delays and/
30
or, increased prices over and above
standard industry levels. 20
In a similar context, we would have 10
capacity concerns heading into 2016
in respect of main contracting and 0
specialist contracting (mechanical
-10
and electrical). Specifically in respect
of high value fast-track projects and -20
highly serviced €100 million+ projects
in the Foreign Direct Investment (FDI) -30
sectors. The primary reason for this
-40
concern would be the limited number
-50
2007
2008
2009
2010
2011
2012
2013
2014
2015(e)
2016(f)
Employment data source 2007-2014:
Central Statistics Office
Tender price Construction output Construction employment
change change change
AECOM 7
AECOM Ireland Annual Review 2016
Sector performance
In any recovery there is a train of Recovery: Infrastructure and Capital increase in demand from a growing
thought that a rising tide lifts all Investment 2016–2021’ included a cohort of would-be purchasers unable
boats and indeed ‘everything else -1.5 percent decrease on 2015 in to meet the Central Bank’s revised
being equal’, the general principle of exchequer capital investment. The mortgage lending ratios, housing
an economic recovery benefitting investment plan shows increases in benefit individuals/families unable to
all should apply. Of course the subsequent years to 2021, see Table 1 meet rising rent in the private sector
‘everything else being equal’ is opposite. Figure 2 below illustrates the and the homeless.
the difficult piece and, just as split across the key capital spending
reflected in the rate of recoveries in departments. In the first half of 2015 we started
the regions referred to earlier, the to see the cost of developing new
performance of different sectors, and An increasing area of importance residential units start to make
as a consequence the construction is non-exchequer capital spending economic sense when compared
U.S. Army Base Camp Carroll
activity in same, also varies. In arising from the re-commencement against the cost of buying surplus
the following sections, we take an of the public-private partnerships stock. In addition, the better located
overview of the key sectors and the programme and spend by semi-state and quality surplus stock or work
outlook for 2016. bodies. In the case of the latter a in progress which was idle in the
significant proportion of capital spend immediate aftermath of the crash had
Public sector can relate to supply of plant and been purchased at that point, thus a
The public finances have shown good equipment, nonetheless semi-state shortage was emerging in key markets,
recovery in 2015 with employment up activity is an important contributor to particularly in Dublin. However as noted
and consumer spending increasing, the construction industry. above, with rising rents exasperating
leading to increased tax revenue as a social housing problem a public
well as a reduction in social welfare Residential debate ensued in the second half of
payments. However, coupled with this, The residential sector would still appear the year leading to general uncertainty.
the growth in the economy in 2015 of to be in a dysfunctional state. Since
circa 6 percent increases the potential the economy came out of the crash it In response to this growing problem,
amount of borrowing in absolute has been struggling to cope with the the government announced a series
terms which the government can take stresses of oversupply in some areas, of measures in early November aimed
on in 2016. The Irish government’s undersupply in others and in particular at bringing stability to the market.
Budget 2016, which was preceded by a severe shortage of social housing These included rent reviews every two
the publication of the government’s provision. Social housing has suffered years as opposed to every year. They
six-year Capital Plan ‘Building on the from years of under-investment, an also introduced measures aimed at
Other (216) Agriculture (217)
Figure 2
2016 exchequer funded public Transport, Tourism Communications, Energy
capital programme (€m) and Sport (1016) and Natural Resources (107)
Source: Department of Finance
Budget 2016
Education and Skills (545)
Office of Public Environment, Community
Works (102) and Local Government (539)
Justice (130)
Health (414)
Jobs, Enterprise
and Innovation (495)
8 AECOMWest Cork Arts Centre,
Uillinn, Co Cork.
AECOM services: Project management,
cost management, employers representative.
Image courtesy of F22 Photography.
priming supply by reducing the costs of development will be in the starter advanced in 2015, and we expect
development, with rebates on levies of home market. this trend to continue through 2016
starter homes in Dublin and Cork, and and 2017 as Dublin city centre Grade
standardising apartment standards. Finally, it should be noted that we A accommodation remains in short
had a number of reminders in 2015 supply, with the majority of that under
Undoubtedly the number of of the legacy quality issues that lay construction being pre-let. Investment
completions in 2015, estimated to undiscovered during the building boom funds continue to be active, and we
be circa 12,000 units, was adversely which demonstrates the importance anticipate they will continue to seek out
affected by the uncertainty of the of the current building control opportunities for further acquisitions
second half of the year. We expect amendment regulation requirements. and to maximise the value obtainable
the recent measures will first and through re-development where
foremost provide a level of certainty Commercial market necessary and achievable.
and an impetus to kick start some The pending shortage of large
residential development however, footprint commercial offices led to Outside of Dublin new build activity
given the Central Bank restrictions on a noticeable increase in office floor is restricted. Demand for space is
lending ratios and the rebates being on space granted planning in 2014. increasing and similar to Dublin, large,
units under €300,000, the bulk of the A number of these schemes were good quality accommodation is limited.
Table 1
Multi-Annual Capital Investment Framework 2016-2021 (€m)
2016 2017 2018 2019 2020 2021 Total
Agriculture, Food and the Marine 217 208 208 208 208 208 1,257
Communications, Energy and Natural Resources 107 107 137 192 192 192 927
Education and Skills 545 599 623 654 700 700 3,821
Environment, Community and Local Government 539 623 709 685 700 700 3,956
Health Group 414 454 473 550 570 600 3,061
Jobs, Enterprise and Innovation 495 525 490 500 500 500 3,010
Justice Group 130 157 118 150 160 160 875
OPW 102 102 127 137 147 157 772
Transport, Tourism and Sport 1,016 1,015 1,167 1,238 1,607 2,000 8,043
Other 216 180 178 286 216 183 1,259
TOTAL 3,781 3,970 4,230 4,600 5,000 5,400 26,981
Source: Department of Finance Budget 2016
AECOM 9AECOM Ireland Annual Review 2016
Newcastle Promenade,
Newcastle, Co. Down.
AECOM services: Landscape architecture,
civil engineering, structural engineering,
quantity surveying and resident engineering.
Industrial considerably less than that of a maintenance of circa 2,000 kilometres,
Similar to the residential sector, the decade ago. and improving over 2,000 kilometres of
crash resulted in a large stock of local and regional roads. In addition a
vacant units and as a result investors Tourism, sport and culture number of key national route schemes
or occupiers can purchase units at a The tourism sector has become an such as the N17/N18 Gort to Tuam will
lower cost than new build and even increasingly important sector in the continue, and new projects like the New
allowing for modifications, can obtain Irish economy. Estimated to have Ross bypass and Gorey to Enniscorthy
better speed to market. generated more than €6 billion revenue route will get underway.
in 2014 it is a key stimulator of activity
Thus, construction activity in the in the construction sector. In particular The seven year programme also
industrial sector in 2015 has been given the number of transactions in includes €3.6 billion for public transport.
almost entirely owner occupier new the hotel market, new owners and/or The headline project in this sector is
build and/or expansion of existing operators bring new investment in Metro North which is planned to be
facilities. With exports continuing to the refurbishment or re-positioning operational by 2026/27. The current
grow strongly in 2015 (17.5 percent of the property. seven year plan includes the completion
increase in first nine months of of the LUAS cross city project, the
2015 compared to same period in Again, Dublin features strongly in this re-opening of the Phoenix Park tunnel
2014) and a steady stream of new sector with room rates increasing as and completion of Dublin city centre re-
announcements from IDA Ireland the bed shortage intensifies. As such signalling programme.
backed foreign direct investment, the there will be an appetite for building
prospects for construction activity in new hotels or extensions in the Dublin The Irish Water €1.77 billion Capital
the industrial sector are strong. market. Regionally the focus is more Investment Plan 2014–2016 is on-
likely to continue to be transactional. going and we are now seeing regular
Retail Following on from the huge success announcements of contracts being
Consumer spending in 2015 continued of the Wild Atlantic Way, Failte Ireland awarded for a range of schemes across
on the upward trend and boosted have embarked on a significant the country including Roscommon,
confidence within the sector. This investment programme providing grant Kildare and Donegal announced in
confidence in turn has helped to assistance to a range of projects to the first week of the year. The recently
boost retail construction activity with promote their new initiative — The published Water Services Strategy Plan
expansion plans announced for out of Ancient East. This will provide an lays out Irish Water’s short, medium and
town locations such as Liffey Valley, important stimulus to economic long term goals over the next 25 years.
Dublin, continued expansion of budget activity and in turn construction.
supermarket chains, and investment The recent onslaught of bad weather
in renewing a number of high street Civil infrastructure has brought the subject of flood
brands and forecourt convenience In the recent government “Capital defences back front and centre when
stores. Plan 2016–2021” a capital investment similar events of 2009 are still fresh
envelope of €9.6 billion was identified in people’s memories thus we will
Notwithstanding this improved for the next seven years. undoubtedly see efforts to accelerate
confidence, the challenging financial a number of the schemes which have
environment makes capital investment Of this, €6 billion relates to investment been progressing through planning and
decisions more difficult thus, whilst in national, regional and local road design.
we would expect further growth in networks including a 2016 capital
this sector in 2016, it will remain programme with provision for the
10 AECOMConstruction costs and tender prices
Competitiveness is key to sustaining of labour rates. In response to this It is important however that the
any recovery and the Irish construction the government introduced ‘The competitiveness and value for money
industry has, whether by necessity Industrial Relations (Amendment) that has been available over the last
or design, maintained tender inflation Act 2015’ in August. It provides for couple of years is not eroded with
at modest levels over the last five the establishment of Registered high inflation rates. In that regard 2015
years. Of course the ability to do this Employment Agreements and saw tender price increases of circa 5
is heavily dependent on costs similarly Employment Regulation Orders (ERO). percent which, if exceeded or repeated
being contained. We review the trends It is likely that industries such as the over a number of years, would
emerging in 2015 and look ahead to construction industry will move to reduce that competitive advantage.
anticipated activity in 2016. introduce ERO’s, and we have seen Similar to the cost index, tender
examples of this in October when two indices represent average figures,
Construction costs ERO’s were introduced for the security and individual elements and location
The euro was weakened against both and contract cleaning sectors. It is factors will combine to generate
sterling and US dollar through 2015 also likely that there will be pressure same. Among the cost drivers which
which put pressure on the price of to increase pay rates in 2016 in have shown most volatility have been
imports. Notwithstanding this, the conjunction with the establishment preliminaries for both main contractors
overall level of increase in construction of an ERO. and specialist sub-contractors. In
material prices averaged 1.1 percent addition, contractors approach to risk
in the 12 months to September We anticipate that construction costs and pricing of same has hardened over
2015. This included a range of price will on average increase by circa 2.5 the last 12 months.
increases including stone at +9.3 percent in 2016.
percent, bituminous macadam Looking forward to 2016 we anticipate
and asphalt +6.4 percent, lighting Tender prices that tender price inflation will continue
equipment +5 percent, decreases of As noted earlier and illustrated below, at an average of circa 6 percent with
-6.3 percent in sand and gravel, and tender price increases over the past variation dependent on location.
ready mix concrete -2.4 percent. five years have remained at modest The regions should have inflation of
levels. This has contributed to restoring circa 5 percent whereas the greater
Since the Supreme Court ruled against sustainable competitiveness after a Dublin area will have circa 6 percent–
the system of Registered Employment number of years where the prevalence 8 percent.
Agreements in 2011 there has been of abnormally low tenders was a feature
a degree of uncertainty in respect of the industry.
Figure 3
AECOM Tender Price Index (%)
20
15
10
5
0
-5
-10
-15
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015(e)
2016(f)
AECOM 11AECOM Ireland Annual Review 2016
Visit Belfast,
9 Donegall Square North, Belfast.
AECOM services: Architecture, interior design,
civil and structural engineering, mechanical
and electrical, project management, cost
management.
Image courtesy of Rory Moore Photography.
Industry review:
Northern Ireland
12 AECOMNorthern Ireland Grade A commercial office York Street Interchange,
Belfast.
The Northern Ireland (NI) economy accommodation remains in short
is expanding at an annualised rate of supply in Belfast and this is driving AECOM services: Engineering design,
1.3 percent to Quarter 2 2015. This rental costs up. Headline rentals are digital media.
is lower than the United Kingdom up approximately 20 percent over the
(UK) and Republic of Ireland trend, but last twelve months with less attractive
growth none the less. The brighter side rent free periods or contributions. The the opportunities they are tendering
of this statistic is that construction market is beginning to respond to this for locally. It is likely this will encourage
contributed up to 1 percent of the total with the construction of new space in some inflation within tender prices over
1.3 percent growth. The economy has Belfast; however more space will be the next twelve months.
still some way to go to get back to the required over short and medium terms.
peak output achieved in 2007/2008, The residential market has started to
and a sustained recovery will remain Retail space in NI still has relatively gain momentum with house prices up
dependent on recovery in the UK and high vacancy rates, however, there is more than 10 percent year-on-year
the Republic of Ireland. an obvious recovery taking place in and this trend looks set to continue.
Belfast with the change in rating policy It is noted that house prices are
Having lost twelve months in deadlock, — therefore town and city centre still significantly below their peak of
the recent political agreement on locations are becoming more attractive 2007/2008.
departmental spending and devolution again.
of corporation tax will allow business In conclusion, it is expected that the
and government departments to There has been some consolidation recovery in the NI construction and
better plan their capital expenditure amongst building contractors which is property will continue at a modest but
for the future years. It is hoped this will thought will lead to more sustainable sustainable pace.
give both business and government companies for the future. As with last
fresh confidence to push shovel ready year the local tier one contractors
projects out to market. In our opinion, it have built successful relationships in
cannot be overestimated the positive Great Britain and much of their work is
effect of reducing corporation tax to now centered on delivering within that
12.5 percent from April 2018 will have market. To an extent this has led to the
on private investment in NI. contractors being more selective about
AECOM 13AECOM Ireland Annual Review 2016
Key statistics at a glance
Construction output (£m) Overall construction output, broken down
into new work and repair and maintenance
Repair and
4,000 maintenance
(26.5%)
3,000
2,000
1,000
0
New work
(73.5%)
2006 2008 2010 2012 2014
Sub categories of construction output Overall construction broken down into
Q2 2015 housing, infrastructure and other work
Infrastructure Other work
(22%) (42.3%)
(8.5%)
Infrastructure
(4.9%)
maintenance
Repair and
(1.6%)
Other work
(11.9%)
Housing
(4.7%)
New work
Housing
(35.2%)
Source: Department of Enterprise, Trade & Investment Percentages do not always tally to 100 as each category is
Construction Output Statistics. individually deflated and seasonally adjusted.
14 AECOMGreen Room Restaurant, LIT, Moylish Park, Limerick. AECOM services: Project management and cost management services. Image © Bowe O’Brien Photography. 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 Ireland Annual Review 2016
Martin Shanahan,
CEO, IDA Ireland
IDA Ireland continues to be very Dublin is seen as a tech hub. We see that you have a turnkey solution, the
successful in attracting foreign that success continuing with on- more it puts Ireland on the map in the
direct investment. Do you anticipate going announcements from the large first instance and then the regions
continued growth in the volume of tech companies and a range of small the solutions are in. You are right also
investments in the next couple of companies, which we expect to be that there is a regional policy aspect
years, and if so, what level of growth the next Facebook, Google, Amazon, to it, in that we want to attract more
do you see as being achievable? Microsoft etc. investment to the regions.
We set out a very clear strategy in Life sciences, which can be broken Just to be very clear the reason we are
March of 2015 with our goals for the down as pharma, bio-pharma and back in that market of building advance
next five years. This included 900 new medical devices, is also performing units and office buildings, nine of
investments, and 80,000 jobs gross strongly and in particular bio-pharma, which are planned over the next three
associated with those investments, in where we have seen some really years, is because the private sector
that period. Ireland by any objective significant announcements, such has not stepped up to deliver those
measure achieves much more foreign as BMS, Alexion and Regeneron to solutions. The more the private sector
direct investment than one might name a few. We are also seeing strong can deliver solutions the better, and it
expect given our relative size, IDA has performance in the sub-supplies is not necessarily an area we want to
always set itself a high bar in terms of sector such as Abec in Fermoy and be actively involved in the delivery. That
attracting investment and we have set Optel Vision in Limerick which supply is not to say we are not in constant
ourselves a high bar again. this market. discussion with clients about property.
We have a large property division in IDA
Within these goals it is also important About 70 percent of our investments however it isn’t just about property, it
to state that as well as achieving high come from the United States, followed is also about strategic sites and land
levels of investment we have also set by Europe at 20 percent and 10 availability. We have invested in the
new targets around the dispersal of percent from the rest of the world. acquisition of land banks and utility
those investments across the regions. We would like to see them all grow in intensive strategic sites, and that has
We have said we will aim to increase absolute terms but we would like to see worked extremely well for us.
investments in the regions outside of Europe and the growth markets of Asia,
Dublin by 30 percent to 40 percent South America, Russia and BRIC (Brazil, Competitiveness and future skills
over the lifetime of the strategy, which Russia, India and China) countries needs are both subjects which the
again is a stretch target, and that we essentially growing faster which would construction industry is acutely
will achieve the same high level of balance the portfolio. aware of and they are often
investment into Dublin as we have in intrinsically linked. How is Ireland
the past five years. In recent years IDA Ireland has performing in this regard and
adopted a policy of developing are there any areas of particular
What sectors do you see driving a number of Advance Units in concern from an IDA Ireland
growth in investment and will the regional locations. Has this policy perspective?
United States continue to be the been an initiative to meet client
pre-dominant origin of inward requirements for speed to market In terms of what we do, attracting
investment? or an initiative to promote regional foreign direct investment, it is
locations or both? Is the policy likely extremely competitive. We are
We concentrate on a small number of to expand in the coming years? competing with a multitude of
core sectors; technology, life sciences, countries and I’m not sure it is fully
financial services, engineering and It is a bit of both. Certainly in terms understood the level of competition
food. We have been extremely of winning investments the easier there is; it is all hard won. In order for us
successful in the technology area and you can make it for clients and show to continue to be competitive we need
16 AECOMto ensure we have the talent, the right
people and they are aligned through
the education system that enterprise
needs. There has been good work
done in this, but I think there is always
room for improvement in that space.
Keeping costs competitive is a really
important issue for us and that is all
costs, including labour. One of the
concerns is, having gone through a
difficult economic period where cost
competitiveness rectified itself, that
now as an economic recovery takes
hold we don’t become un-competitive
again; that is hugely important.
Are there any other infrastructural
problems which are emerging as
road blocks to investment?
As I look at the pipeline going forward
the availability of commercial and whether it is pharma and medical to be done close to market are now
residential properties is potentially a devices or technology and financial absolutely mobile so we look at those
limiting factor in the future. If I look at services. trends all of the time.
Dublin I can see enough Grade A office
accommodation coming on stream We are also looking at attracting
over the next 18–24 months which foreign direct investment in new areas
is going to help us greatly. What we such as marine, arts and culture.
need is a steady supply, and not peaks The global explosion of the business
and troughs. services sector has been empowered
by rapid technological developments,
On the residential side it is potentially which have allowed traditional services,
a limiting factor in Dublin, so what I such as financial and globally traded
would say from a competitiveness business, to be dispersed worldwide
perspective, both commercial and and new categories of service activities
residential property are very important. to develop.
Are there any new areas of interest In this regard property led investment
or initiatives which you see IDA in managing portfolios outside of
Ireland pursuing in the coming Ireland is an area we are focussed
years? on. Technology is having an impact
on everything and making a lot of
In relation to sectors, one area that the convergence happen, so where
we are extremely interested in is things which were not internationally
convergence between sectors, mobile previously because they had
AECOM 17AECOM Ireland Annual Review 2016
Professor Neil Gibson,
Director of the Ulster University Economic Policy Centre
2015 saw significant political sector is the size it is, it remains a ‘two activity and expansion of existing firms.
impasses in Northern Ireland. percent economy’ without the potential The danger with corporation tax from
What impact, if any, has this had to match the rates of growth in its a Northern Ireland perspective would
on economic activity in Northern southern neighbour. be if we saw it as the solution to all our
Ireland (NI)? problems, it is one part of the tool kit.
In terms of the Republic of Ireland,
Any form of instability can’t be good one of the significant risks is money Has the economy in Northern
but we should start by reflecting on the is too cheap for a six percent growth Ireland got a two tier market vis-à-
fact that it is now behind us, and the economy and it won’t be able to put vis Belfast and the regions?
‘Fresh Start’ agreement unusually came rates up when it needs to, rather they
with a change in policy direction about will go up when Europe needs them. Yes it has, similar to that in the
corporate tax which sent a message So although these are good problems, Republic of Ireland. However, there has
that they were back in government with overheating problems, they present a been investment in industry — the
some business-focussed changes. different set of challenges. agriculture sector has done quite well
on the island, and industry such as
I think we are actually in quite a good Do you expect the recent devolution pharma in the Republic or transport
place at the end of the journey in of corporation tax powers from the equipment in Northern Ireland around
2015. During the year, the impasses UK government to the NI Assembly aircraft, heavy machinery/quarrying and
had a marginal effect perhaps on to have a significant impact in terms tourism. That sectoral composition has
investors who were just about to make of Foreign Direct Investment? been more of a tapestry than people
a decision. In terms of people already might have thought and has allowed
doing business in Northern Ireland There should be some announcements some regional opportunities.
it’s more tangential. The 2015 growth from companies that are already here
figures are not hugely affected by the in Northern Ireland. In terms of new That said, the heavy lifting in job
political instability. green field announcements, you are creation remains professional services.
expecting more of that effect to come Although a two tier market has come
when the power is actually here. If you to pass, it hasn’t been as acute as
What is the Economic Policy Centre could go somewhere very close to here I thought it would because of this
forecasting in terms of economic where they already have a low rate you eclectic mix of sectoral growth, and
growth in Northern Ireland and would need to have a very compelling that has to be something that inward
the Republic of Ireland for 2016 reason to go somewhere that will have investment agencies and government
and 2017? one in three years. policies continue to promote.
I would see the prospects for growth That said, Northern Ireland has a What is the current status in
as fairly modest for Northern Ireland number of other advantages; it is Northern Ireland in terms of
because austerity is very difficult. We very competitive from (a) a salary availability of finance for both
are only arguably in the middle of the perspective in some sectors, (b) rent, property developers and the
journey that the Republic of Ireland (c) cost of living, and (d) because we consumer seeking to get on the
has finished. We now have to deal with don’t have the European parent to property ladder?
cuts in the public sector, which is the the same degree that the Republic of
biggest employer in Northern Ireland. Ireland has, we can offer more flexibility Taking the consumer first, conditions
which has the potential to be quite have improved considerably, we are
If Northern Ireland can get to two crucial and changes the dynamic about back to fairly normal consumer lending.
percent growth, that would be an what Northern Ireland is.
achievement. I don’t think austerity will On the commercial side, it is more
drive us back into recession territory Our modelling work would suggest difficult because there is very little
unless rapid interest rate rises were that the corporation tax will be a very support in off-the-shelf finance for
to come. For so long as our private important driver of inward investment speculative build. There is almost
18 AECOMnobody in that space and no sign that
any of the institutions want to be there.
You might see the public sector getting
involved to some degree although
they will be very cautious; they are
not awash with money either to do
speculative build. It might involve some
public sector underwriting of the risk
market. If that is the case it will be a
very unfortunate outcome but not one
that we could rule out at this time if it
takes rapidly escalating rental costs to
finally drive investment in the market.
Are there any policy initiatives
which you would advocate to the
NI Assembly which would stimulate
activity in the NI construction
industry?
A couple would spring to mind for me; invest and improve. Radical change in
one of the critical changes is planning this area could be transformative.
going to local councils, it is finely
balanced as to whether this will be What advice would you give to
hugely beneficial or damaging to local construction firms in terms of
development. So the executive should how they can better structure
be collecting good data on planning themselves to promote innovation
permission statistics and quickly and, in turn, generate higher
decide if we need to give councils any growth?
support.
Partnerships are critical. I think for all
The second thing I would think about organisations, you will not have all the
is an appropriate rating policy. For skills sets within your own organisation
example, Northern Ireland has very necessarily. You will need skills you
generous rating reliefs on vacant never thought you would — be it
property; you want to start to think Information Technology, leadership or
about rising rates quite quickly on organisation structure skills — so the
vacant properties. More controversial conversations that needs to take place
measures might include making are with the local further education
existing sites with planning permission colleges and higher education
but not in productive use more institutions or trying to avail of the
expensive to hold onto. Rates have multitude of programmes that Invest
the potential to significantly influence NI run. Often it takes someone from
behavior and consequently economic outside to tell you what you need, so
development. It is a fully devolved bring in experts to review your firm.
matter, and the current systems of
reliefs and exemptions is not strategic,
and in fact acts as a disincentive to
19AECOM Ireland Annual Review 2016
West Cork Arts Centre,
Uillinn, Co. Cork.
AECOM services: Project management, cost
management, employers representative.
Image courtesy of F22 Photography.
20 AECOMClancy Quay,
Islandbridge, South Circular Road, Dublin 8.
AECOM services: Cost management,
environmental services.
Geographies
AECOM 21AECOM Ireland Annual Review 2016
Ireland
The performance of the construction On the commercial side, Cork is still years. We may also see construction
industry across the different lagging behind Dublin; however, 2016 activity in early 2016 on their current
regions of Ireland will have a lot will see the first commercial building of sites in Ballincollig, Mount Oval, Belfield
of commonality as the underlying notable size being completed by John Abbey and Crosshaven.
general economic performance Cleary on Albert Quay in Cork City.
feeds through the economy. However, There are also plans for construction In education, plans for an €18.5 million
regions outside the greater Dublin to begin on the old Capital Cinema site extension to Scoil Mhuire Gan Smal in
area are more dependent on public and Apple has announced 1,000 more Blarney are underway with construction
capital spending and thus these jobs for their headquarters in Cork. planned to start in 2017.
regions will tend to lag behind any
Dublin based private investment Demolition has started for the In healthcare, the Health Service
driven development.
U.S. Army Base Camp Carroll
redevelopment of Páirc Uí Chaoimh Executive are hoping to break ground
and we can expect construction to in early 2016 with a new primary care
We summarise below our overall start on the €70 million redevelopment centre in St. Mary’s Health Campus.
prognosis and identify some of the in early 2016. On the private side, the Bon Secours
key projects in the regions. Hospital recently announced that it
In the residential sector, NAMA is plans to begin construction of the
Cork and the southern region currently building out properties in eagerly awaited North Block extension
The Cork construction industry has Carrigaline and other locations. There on College Road, Cork.
stablised and started to grow over the are also pockets of small private
course of 2015, and we are seeing the residential developments but these The foreign direct investment market
return of sustained construction tender are insufficient to supply the current continues to be a cornerstone of the
price inflation. Cork sub-contractors demand. Viability is still an issue industry in the regions and we have
downsized considerably in the when cost of construction, levies and continued to see a string of IDA Ireland
downturn and with a few large projects contributions are factored in, thus announcements in the region recently
planned in 2016, we are anticipating a the inclusion of Cork in the proposed including international brands such
shortage of suitable sub-contractors abolition of development levies is to be as Apple, GE Healthcare and Pfizer to
for trades such as concrete, formwork, welcomed. O‘Flynn Construction has name a few.
plastering, façade systems, mechanical announced plans for 10,000 homes
and electrical. in Dublin and Cork over the next eight
22 AECOMBelow left: Curragh Racecourse, Above: Maree National School,
Curragh, Co. Kildare. Maree, Oranmore, Co. Galway.
AECOM services: Civil and structural engineering, cost AECOM services: Cost management.
management, mechancial and electrical engineering, fire safety
consultancy, project supervisor design process, façade and
assigned certifier role.
Image copyright (c) Grimshaw.
Limerick and the mid-west region The Limerick Regeneration programme and the South Campus Sports Pitches
In 2016 construction activity in continues apace, particularly in Improvement Plan.
Limerick and the mid-west is primed the housing sector. Phase 1 of the
to take a major step towards catching Churchfield project in Southill should In the healthcare sector, the joint
up with other regions that experienced commence early in 2016 with further venture CERC project with UL is
economic recovery more quickly. While projects in Southill, Cosgrave Park, currently under construction and
there is still a reliance on public sector Weston Gardens, Carew Park and Kings the fit-out of the new emergency
projects, there is also optimism that Island to follow. department has recently commenced.
the levels of private sector activity will
accelerate significantly in 2016. The local third level institutions The Shannon Airport Authority will
continue to develop their campuses. be carrying out substantial runway
The Limerick City & County Council Mary Immaculate College is refurbishment works in 2016. Work
draft budget includes a capital expanding its campus by acquiring recently commenced on Shannon
programme for 2016 to 2018 that and refurbishing the nearby Mount Commercial Properties’ new €6 million
will see €219 million spent on major St Vincent complex and is looking to purpose-built facility for a leading
projects in the city. The programme develop a major new learning resource global operator and employer in the
includes proposals to complete centre to replace the existing library. Shannon Free Zone. This is the first
vital projects and key pieces of Limerick Institute of Technology major investment as part of a €21
infrastructure such as the Opera is proceeding with its Campus million first phase of a programme
Centre and the redevelopment of Masterplan 2030 with the recent of new builds and upgrades of its
Arthur’s Quay, the ‘Hanging Gardens’ acquisition of the vacant Coonagh property portfolio.
site on Henry Street and a proposed Cross Shopping Centre for phased
conference centre on the site of the re-purposing and fit-out as higher Regeneron is investing an additional
former Cleeve’s factory. Also included education facilities. The University of €330 million in Limerick creating
is funding for various infrastructure Limerick (UL) is currently constructing 200 more jobs, bringing the total
projects such as the landmark a ‘Single Training Centre’ for Munster investment to €610 million and total
Shannon Pedestrian Bridge. Rugby, and imminent projects are the expected job creation in the mid-west
extension to the Glucksman Library area of 500 jobs.
AECOM 23AECOM Ireland Annual Review 2016
Council Chambers,
Galway County Council, County Hall,
Prospect Hill, Galway.
AECOM services: Cost management, assigned
certifier role.
Galway and the western region infrastructure project is still some numbers and this in turn raises
Private sector construction activity distance away. On a more positive note, confidence amongst investors. There
has remained stubbornly slow in the M17/M18 Gort to Tuam motorway has been strong activity with hotel
western region through 2015 and the extension and intersection with the M6, transactions across the region and
industry has been reliant on the public near Athenry is advancing well on site. investment in facilities such as the
capital programme as the primary recently completed restoration and
driver of output. It is likely that any In common with other regions, other refurbishment of Ashford Castle. On
growth in exchequer funding for capital public sector departments have an the retail side vacancy rates remain
projects will remain constrained over active public capital programme across very low in Galway city centre and no
the next few years, thus we will need to the region. Examples include a 75 new significant developments have
see an improvement in private sector bed ward block at University Hospital emerged. 2016 may see the market
activity in order for the industry to show Galway. The recently announced respond to the growing economy and
an improvement in the region. Department of Education & Skills consumer confidence.
schools building programme including
2015 saw a number of significant seven school projects to go to site in Similarly, office accommodation
announcements which will impact Galway during 2016 in areas such as vacancy rates are in single digit
positively in construction activity in Monivea and Lackagh, and a further percentages, and this low level of
2016 and subsequent years. Among four planned for 2017. In the third level available Grade A accommodation may
the most significant announcements sector, NUI Galway has lodged plans be making potential businesses look
was the €850 million data centre for a 450 bed student accommodation elsewhere. It remains to be seen if the
announcement for Athenry, Co. Galway. development on campus. domestic and international investors
Planning permission was granted in who have been actively developing
September and it is currently with An In the private sector the hotel commercial property in Dublin will
Bord Pleanala. and tourism sector remains a key start to invest in regional cities such
economic driver in the region and as Galway which has a combination
The Galway City Transport Project N6 2015 was another strong year. The of strong business base and a highly
Route Selection Report was published strong dollar and sterling currencies educated work force.
in August however this much needed have contributed to increasing
24 AECOMCentral Bank of Ireland,
North Wall Quay, Dublin.
AECOM services: Cost management, civil and
structural engineering service, façade engineering.
Image courtesy of Visual Lab.
AECOM 25AECOM Ireland Annual Review 2016
UK market forecast:
A change of mood
Trends and forecasts around again, the idea of single-stage Non-housing sectors are beginning to
With demand outstripping supply, tendering or anything other than a contribute more to overall output, just
selectivity was the dominant theme negotiated procurement route is no as housing activity moderates. Output
for contractors in 2015. This was longer unspeakable. The increasingly changes are particularly acute in
while enquiries and new orders flowed common complaint with a negotiated public sector housing, seeing a 29
strongly. Market conditions around the or a two-stage tendered approach percent yearly decline in August (in
country followed similar trends. is that it can take too long to reach a constant prices).
contract agreement.
Feedback from every region confirmed Construction output excluding housing
the common trend for contractors Activity indicators increased in excess of 8 percent year-
to decline complex work while more Recently published construction on-year. That said it is still not enough
straightforward, less risky opportunities output data by the Office for National to offset overall output changes
proliferated. Further, commercial Statistics (ONS) saw a fall in all work posted in August. This underlines the
positions changed significantly among (new work, as well as repair and effect of the housing sector’s influence
all the major contractors with regard to maintenance) of 1.3 percent on a on recent industry conditions.
overheads, and profit and allowances yearly basis at August 2015, yet the
for risk. data posted an increase in new work Looking at the data in more detail
of 3.1 percent over the same period (in reveals the changing fortunes of sector
Extra tendering time was more constant prices). Fluctuation in monthly activity. New infrastructure work has
frequently requested, a higher number data movements therefore continues. increased strongly in the last year,
of projects were negotiated rather posting a yearly change exceeding 31
than tendered, along with a general Despite the volatility, the data set percent in August. It now accounts for
reluctance to tender due to the time comprises a large survey sample and just under a quarter of all new industry
and cost involved. Difficulties in arguably yields sound insights into work, up from around 17 percent a year
attracting tenderers resulted in the underlying trends in the construction ago. Although the base effects play a
need for packaging work or using more sector. Removing noise in the ONS part in the yearly change calculation, it
creative procurement approaches. data and attempting to mitigate its is more likely to do with much greater
perceived volatility, rolling quarterly volumes of infrastructure workload
But the summer brought the first averages recorded similar trends to emerging in the sector.
signs of a shift in mood among main those at a monthly level, albeit with
contractors. Like the seasons coming smaller percentage changes.
Figure 4
AECOM Tender Price Index:
% Change
Forcasts at Q3 2015 on the same
period in 2014
10
8
6
4
2
0
-2
2010
2011
2012
2013
2014
2015
2016
2017
-4
26 AECOMThe commercial sector, specifically ultimately damaging to overall output Though tender price increases have
in London, is set to contribute sound in the medium-term, there should be been remarkable, input cost trends
construction growth over the next complementary developments and have not moved to anywhere near the
two years. This expected rise in investment in skills, apprenticeships same degree. Building materials costs
office construction is the response and training. have increased by approximately
to demand for new space in London, 1 percent on average over the last
on the back of positive UK economic Building costs and prices 12 months.
developments. Rising rents make the Despite annual consumer price
fundamentals for office construction inflation turning negative again, tender Wages continue to climb on the year,
tenable, with rental growth in London prices continue to rise strongly. though there remains variability across
predicted to improve further still. AECOM’s Tender Price Index shows trades. Generally, they are up 5-6
Declining availability and rising City that building price inflation in Greater percent over the last 12 months, which
and West End rents both support London accelerated once again in is a slightly slower rate of average
the supply and demand sides of the the first half of 2015, increasing at change than that seen earlier in 2015.
market. Further tender price pressure the fastest rate since 2002 as the AECOM’s central forecasts for tender
can be expected in London as a result construction industry remained in price inflation are 6.1 percent to 8.4
of this increase in demand. bullish mood. More than this, many percent from Q3 2015 to Q3 2016 and
price metrics have surpassed those 3.5 percent to 6.3 percent from Q3
Forecasts for construction work over of 2008. 2016 to Q3 2017.
coming years are still positive, although
output growth is not expected to be Tender prices increased 8.8 percent on The fan chart (on the previous page)
as frenetic as the near double-digit the year Q2 2015. Provisional figures highlights three key criteria: the
increases seen in the last 12 months. for Q3 2015 indicate an annual change baseline forecast for the current
The last 18 months of sustained of 9.5 percent over the previous year and the following year; the level
activity still does not answer the 12-month period. The increase in of uncertainty surrounding these
question of whether this is a rebound prices was underpinned by plenty of forecasts; and where the balance of
in activity or a sustainable recovery available work, a lack of capacity risks lies.
over the medium and long-term. and strong labour cost increases
Nonetheless, increased cyclicality (Q3 each year usually sees the
in the industry is very likely to be the implementation of wage awards). This Michael Hubbard is an Associate in
noticeable outcome over this and is despite building materials price AECOM London and is a specialist
future periods. If higher prices are inflation posting much lower rates of cost researcher.
not to become self-defeating and annual change.
AECOM 27You can also read
