Dublin is now the seventh most expensive place in the world to build and Brexit uncertainty will not prevent costs rising 7% this year, a recent report on international cities has found.
The international construction market survey by global professional services company Turner & Townsend said Dublin is the third most expensive city in Europe for construction costs, behind only London and Zurich.
The report, which studied construction costs for both commercial and residential projects in 64 markets, said 7% cost price inflation in Dublin over the next 12 months would outstrip the global average of 4.1%. The average cost of construction in Dublin now stands at €2,880 per square metre, Turner & Townsend said. Labour costs have risen 5% in the past year to stand at €35.70 per hour, according to the report.
San Francisco has overtaken New York as the most expensive city worldwide in which to build.
Mark Kelly, Irish managing director at Turner & Townsend, said: “With demand relatively high across the continent, and investment only likely to continue this upward march, the shortage of skilled labour and supply chain capacity in Europe is becoming increasingly problematic, driving significant competition on wages and inflating construction costs further.”
Construction in the North “remained cold” in comparison to the Republic, said the report, with inflation at 0.5% in 2018 and predicted to rise 1.5% this year. The average cost of construction in the North is €2,032 per square metre, said Turner & Townsend. The average wage per hour in the North is much less than Dublin at €25.
Zurich is the most expensive in the world for labour, with workers paid almost €98 an hour.
Despite the rise in costs in Dublin, it should not have a major bearing on the €116bn national infrastructure plan, known as Project Ireland 2040, with the Government likely making provision for inflation in the costs, said construction consultancy firm Mitchell McDermott.
Director Paul Mitchell said:
The Society of Chartered Surveyors report each year has inflation running at around 7% and analysis on our own basket of projects came up with 6%-7%.
“It varies on what you are building and where you are building it.
“We are doing a number of projects in Cork and some on the way in Galway, and we would notice a difference. A lot of inflation is due to supply and demand. It’s not one size fits all. Infrastructure projects are very different in terms of their constituent parts and where you are experiencing the most in terms of tender inflation.”
Chief economist for the Republic at Ulster Bank, Simon Barry said various projects already decided in Project Ireland 2040 would have had to factor in inflation, but cautioned any future plans would have to be subject to rigorous cost-benefit analysis.
“Firstly, the decision to go ahead with any project should only be made after all of the costs are evaluated and identified, and if the benefits exceed the cost,” said Mr Barry
“That needs to be made on accurate, up-to-date, best information available. It does bring extra focus and vigilance to ensure projects are checked to ensure costing is consistent with that. A refresh may be required, or where an analysis needs to be completed, it has to use the best information.”