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New apartment schemes, hotel market recovery and demand for student accommodation driving construction market, Deloitte Crane Survey finds

  • 32,695 completions in the residential market in 2023, the highest since 2008
  • 1,650 new hotel rooms opened in 2023 with 2,850 under construction
  • Total enrolments in full-time education estimated to be 240,000 by 2030 as investors drawn to purpose-built student accommodation

13 May 2024. The construction of new apartment schemes, a recovery in the hotel market and an increase in investor interest in the provision of student accommodation are the key drivers of construction activity in Ireland, Deloitte’s latest annual Crane Survey has found.

The newly published report analyses the development landscape in the country and examines the trends and issues that will impact how the construction industry performs in 2024.

High level of commencements shows impact of government policy on residential market

The report shows a total of 32,695 residential units were completed across the country in 2023. This is the highest number since 2008 with a key driver being a significant jump in the volume of apartments.

Apartments increased to 11,600 units in 2023, up from over 9,100 in 2022 or just 3,450 in 2019. Meanwhile, the delivery of scheme houses remained largely unchanged with 15,500 units completed compared with 15,140 in 2022. The construction of apartments was mainly concentrated in Dublin, which accounted for over 78% of 2023’s new supply of this housing category.

Residential commencements also recorded a notable rise with government policy influencing performance. A total of 32,800 units commenced construction in 2023, a 22% annual increase. This increase has continued into the start of 2024 with just under 12,000 units commenced in the first quarter. On an annual basis, this figure sits at 37,410, the highest level reached during this development cycle.

Key to this significant increase, according to the report, is the development levy waiver and water charge refund which was introduced in April 2023. Market intelligence indicates the waiver and refund scheme improve viability, making units viable that otherwise would not have been. The government has recently announced an extension of the development levy waiver until the end of 2024, and the water charge refund until the beginning of October 2024.

The report highlights how affordability is being increased for first-time-buyers (FTBs) through the government’s first home scheme and help-to-buy initiative. FTB mortgage approvals rose to 30,450 in 2023, up 9% annually and over 21% since 2019 in a trend that is likely to continue in 2024.

In contrast, the volume of mortgage approvals for mover-purchasers decreased 6.8% annually in 2023, which was 15% below 2019 levels.

Commenting, Kate English, Economist and Head of Real Estate Research said: 

Government policy has had a positive impact on the residential market, both improving first-time buyers’ purchasing power and driving construction activity. First Time-Buyer (FTB) mortgage approvals are at a high, while the volume of approvals through the First Home Scheme has risen substantially. The challenge now is meeting this demand.

Growing FTB demand against a backdrop of increasing yet insufficient new supply and reducing release of second-hand stock to the market, places further pressure on the residential market. This is evidenced by the increase in prices, particularly over the past six months.

English continued:

The dramatic increase in commencements can be, in part, attributed to the impact of the development levy waiver and water charge refund. The short-term measure has aided viability, making some units viable that otherwise were not. Uncertainty over whether the waiver and refund would continue has likely resulted in a spike in commencements in the first months of 2024 and may mean commencements will be moderate in the coming months.

Post-Covid tourism boosts hotel market but demand in 2024 is less certain

2023 marked a stellar year for the hotel sector, buoyed by air passenger arrival figures exceeding pre-Covid levels, along with a record-breaking number of domestic trips by Irish residents.

As the market improved, a number of new hospitality assets completed construction with more on the way. An estimated 1,650 new rooms were opened in 2023, and although down from 2022, this represented an improvement on 2019 levels. The majority of these completions were in Dublin, with ReZz, Premier Inn and Travelodge Plus all adding beds to their Irish portfolios.

At the start of 2024 just under 2,850 rooms were under construction across Dublin, Cork and Galway, with the majority due for delivery in 2024. Over 550 of these rooms were completed in the first quarter, a further 1,080 rooms are due to complete before the end of the year, with the remainder falling into 2025 and 2026. The completion of new stock over the coming years will bring with it new brands to the Irish hotel market. These include the Hoxton, Citizen M and Ruby Hotels.

The Deloitte report includes STR data showing the Average Daily Rate (ADR) commanded by hotels in Dublin City was €204, the highest rate since records began and 22% higher than the pre-Covid average recorded in 2019. Meanwhile, the Revenue Per Available Room (RevPAR) was €164 in 2023 in Dublin City, also a record-breaking figure, and 17% higher than the 2019 average. While rates vary considerably in the surrounding Dublin area and elsewhere in Ireland, across the board these record-breaking trends held true.


Upcoming new hotels

John Doddy, Partner, Head of Real Estate said: 

There are a number of really encouraging indicators that show the recovery of the hotel market in Ireland following Covid-19, from construction activity to occupancy rates. However, it is uncertain whether this stellar market performance will continue, as occupancy, Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) each recorded a decline in the year to March 2024. Initial market soundings suggest a weakening in demand, with hotel groups citing the increased VAT rate and increased competition as key challenges facing the industry in 2024. However, several key events, such as Taylor Swift and Bruce Springsteen concerts, will likely bolster performances over the summer.

Demand for student accommodation grows as third level enrolments set to peak in 2030

There were 198,970 full-time students enrolled in third level institutions in Ireland in the academic year 2022/23, the report finds. Enrolments have increased by 15% since 2014, owing to a combination of domestic demographics, increased international enrolments and an expansion in course availability.

By 2030, total enrolments in full-time third level education are estimated to be 240,000, marking an increase of 33% from 10 years prior.

An estimated 1,630 beds were added to the stock of purpose-built student accommodation (PBSA) in 2023, with Cork absorbing the largest share (814 beds).

Completions in 2024 will be more limited, as just three schemes, totalling 1,160 beds were actively on site at the start of 2024. The largest of these, Novel Bottleworks, at the former Coca Cola bottle factory on the Carrigrohane Road in Cork completed recently and is taking bookings for the 2024/2025 academic year, his bringing total stock in the Cork market to just over 7,100. The remaining beds under construction at present are based in New Harbour, Galway (345 beds) and Stoneybatter, Dublin (193 beds).

Planning applications lodged towards the end of 2023 and start of 2024 are a prime example of the renewed interest in the student accommodation sector.  Planning applications of scale are located across Dublin, Cork and Waterford, through LRD applications. In total, there are over 10,900 units in the planning pipeline across plans applied and plans granted. The number that will translate into new PBSA stock remains uncertain, as SHD delays, and viability concerns weigh on some of these schemes.

Commenting, John Doddy, Partner and Head of Real Estate said: 

The Crane Survey highlights a continuation of the strong demand for purpose-built student accommodation with third level enrolments set to peak in less than six years. While construction activity in student accommodation dwindled in the opening months of 2024 and completions in 2024 are expected to be more limited, current construction activity perhaps underestimates the level of activity and investor interest for student accommodation at present.

Office space completions to rise significantly in 2024 before a drop

Office values have declined consistently since the onset of the Covid-19 pandemic, triggered by the introduction of public health restrictions and the subsequent shift towards remote working. There have been 16 consecutive quarters in which a decline has been recorded on an annual basis.

2023 saw approximately 95,400 sq m of office space delivered in Dublin, representing a decline of almost 60%. At the start of 2024, an estimated 378,000 sq m of office space was under construction. The vast majority of this is in Dublin city centre and close to 230,000 sq m is due to reach completion in 2024. Outside of Dublin, approximately 61,000 sq m of new office space is on site across Cork, Limerick and Galway.

Commenting, Kate English, Economist and Head of Real Estate Research said:

2024 will see a rise in the delivery of new office space and will bring with it, a rise in the vacancy rate. However, beyond 2024 the picture alters notably. An estimated 97,000 sq m is due to complete construction in 2025, with the remainder due in 2026. With all space due in 2026 already pre-let, the last delivery of available new stock to the market will be next year.

The continued decline of office space being delivered to the market is noteworthy, while there are signs that indicate speculative development will return, it is uncertain when that will be. Values have declined in 2023 and are anticipated to continue to fall in the first half of the year.  There are cyclical factors at play including interest rate hikes and macroeconomic uncertainty, while there are also structural changes taking place in the market, including the rising demand for office spaces that meet ESG requirements and the continued popularity of remote working. Even though 80,000 jobs were added to predominantly office-oriented sectors in 2023, this has failed to translate into an upward lift in office values or a decline in the office vacancy rate.

Increase activity required to meet needs of expanding population, but barriers remain

Kate English, Economist and Head of Real Estate Research said:

There is a clear demand and need for increased activity in the construction sector, across all areas and not just in the ones focussed on in Deloitte’s Crane Survey. This is to ensure we can continue to provide the services and spaces required for an evolving and expanding population. Similarly, to meet targets set by the European Building Performance Directive, extensive retrofit programmes will need to be conducted by both the public and private sector. A recent report showed that if we are to achieve the government’s targets in housing and domestic retrofitting, Ireland will need 50,000 more people to work in construction in the next decade.  To deliver this, it will require significant volumes of capital and of course, a larger workforce (of all skillsets) in the construction industry.

Despite the positives coming through in residential construction data, it is important to note that the improvement is starting from a low base. The improvements should also not be taken for granted as challenges and indeed barriers remain.  Planning and with it, the National Planning Framework review are two prime examples. Ireland’s planning system needs reform. While the Government has committed to ensuring the Planning and Development Bill passes before the Dáil’s summer recess, there are still many queries from stakeholders that have been left unanswered. A wholesale rewrite was always going to be an enormous undertaking, however the views of stakeholders and those tasked with implementing and working with the legislation on a day-to-day basis will be critical if we are to deliver much-needed housing.