The year in review: Republic of Ireland’s construction sector in 2024

ROI's economy showed good growth in 2024, amid mixed signals, providing a solid foundation for construction activity.

GNI (Modified Gross National Income) in 2023 reached a record high of €280 billion, up 5 per cent on 2022. This reflects a strong domestic economy, driven by sectors including technology and financial services. This was underpinned by strong domestic consumption, and a labour market experiencing full employment and increasing wages.

2023’s strong results set the stage for continued growth in 2024. Modified Domestic Demand (MDD), which measures spending by Irish consumers, government spending on goods and services, and modified investment, is a key measure of the health of the local economy. This stood at €61 billion at Q2 2024.

As Figures 1a and 1b demonstrate, this represents a drop in MDD as of mid2024. This was influenced by capital investment declining significantly during the second quarter (-65.3 per cent quarter-on-quarter).

Additionally, while some sectors, such as exports and services, showed resilience, challenges in areas like housing and manufacturing hindered broader economic growth. While fiscal policy aimed to balance investment in public services and infrastructure, the temporary moderation in expenditure growth, coupled with efforts to manage inflationary pressures, likely influenced investment behaviours.

However, overall, MDD is expected to have grown by 3 per cent in 2024, and to grow by 3.1 per cent in 2025. Growth is being driven by robust tax revenues, strong house price growth and improved sentiment indicators.

This growth, coupled with a cooling inflation rate — down from previous high of 6.3 per cent in 2023, to a projected 2.3 per cent for 2024 — should help to ease cost-of-living pressures on households, and to improve real income prospects.

The construction sector mirrored the easing of inflation across the general economy, with 2024 seeing further stabilisation in tender prices.

That said, the picture for construction in 2024 is not as strong as it might seem on first viewing. The industry appears to be performing strongly, as reflected in output value over the last number of years. However, the reported industry output volume growth over 2023 and 2024 has been mixed, with some recovery in 2024 and a 5.2 per cent increase in seasonally adjusted volume over the first nine months of the year.

The reasons for this are multifaceted. High tender price inflation in 2021 (12.5 per cent) and 2022 (12 per cent) drove output value, rather than volume. 2023 and 2024 have seen an easing in the rate of tender price increases to more modest levels, however we have also seen a stalling of employment levels in the industry, with average employment in the 165,000-170,000 range. The reasons for this are mixed; explored in our 'resource constraints' section.

In addition, whilst the wider construction industry continues to maintain strong output, and there is a significant pipeline of major programmes in planning, there are individual sector trends within the industry with varying factors in their outlook.

Public sector

Government policies have focused on fostering economic activity, with investments in housing, healthcare, and infrastructure aimed at addressing needs and attracting talent to support growing industries like green energy and technology.

Government investment in components of the Public Capital Programme (PCP) and the ongoing delivery against the National Planning Framework has been strong, reflective of robust public finances. Exchequer funding of the 2024 PCP amounted to circa €13 billion, a 7.8 per cent increase on 2023 with a further 11 per cent increase allocated for 2025.

Among the key sectors absorbing the bulk of the NDP are transport, housing, health, education, and environment. This investment is essential to address the infrastructure deficits accrued over decades, and to improve productivity and capacity in the economy. Critical in this regard is the continued investment in public transport, water, and energy infrastructure. Combined, these sectors can facilitate improvements to ROI’s most pressing issue: its housing crisis.

Residential

As the single biggest sector of ROI’s construction industry, sitting across both public and private investment and involvement, the overall construction industry’s output relies on the strength of residential investment and delivery.

The Budget 2024 saw €5 billion in capital investment from the Government in response to the severe ongoing shortage of affordable, liveable accommodation in ROI. The Budget 2025 went further, assigning a record €6 billion in capital investment in housing for 2025. The Government’s revised housing numbers targets the completion of 303,000 new homes between 2025 and 2030, averaging 50,500 new homes per year.

Whilst residential completions in 2024 struggled to reach the government’s Housing for All target for the year of 33,450, in contrast, residential commencements saw a significant shot in the arm. Some 54,574 home builds were started in the first 11 months of 2024, which will provide a boost to completions over the next couple of years (see Figures 2a and 2b).

This acceleration in commencements will need to continue if the industry is to meet the revised completion targets of 50,500 for 2025 and for the years ahead.

Record levels of state funding and the issuance of ambitious nationwide housebuilding targets provide clarity for the sector. However, state investment needs to be matched by similar levels of output growth from the private sector to meet the huge untapped demand for homes.

Unfortunately, this has not been the case. The viability of private residential schemes is deeply challenging at present. Inadequate supply of housing stock and supporting infrastructure — water, energy, and transport — is the single biggest issue facing the market. This viability challenge is a significant roadblock to converting existing granted residential planning permissions into completed residential developments.

In addition, Dublin has the highest average rent levels in the EU. Coupled with years of high inflation leading to cost-of-living pressures, many people cannot save the deposit required to purchase property, in part because their rent payments often exceed a potential mortgage payment. In response, the Government has introduced schemes to try to bridge the gap, but this remains a persistent challenge in the ROI housing market.

Some 54,574 home builds were started in the first 11 months of 2024, which will provide a boost to completions over the next couple of years.

Water

Uisce Éireann, Ireland’s national water utility, is embarking on an ambitious Strategic Funding Plan for the regulatory control period (RC4) from 2025-2029. Aiming to address the pressing needs of the country's water and wastewater systems, the plan outlines a projected capital expenditure of €10.2 billion.

This investment, pending review and approval by the Commission for Regulation of Utilities (CRU), is crucial for advancing infrastructure and asset development. Furthermore, estimates suggest that an additional €60 billion in capital investment will be necessary by 2050 to enhance service delivery, comply with evolving regulations, secure sustainable water resources, and facilitate economic growth, particularly in the housing sector.

Reflecting on past efforts, Uisce Éireann has significantly increased its capital investment, with €1.2 billion spent in 2023 and €1 billion in 2022. These investments have focused on improving water and wastewater service quality, conserving resources, and modernising treatment plants and networks to meet future demands.

Challenges remain, notably the need to repair, upgrade, and expand Ireland's water networks to accommodate the increasing demand driven by housing targets. Despite progress, infrastructure struggles persist, evident in the loss of 37 per cent of water intended for delivery in 2022 due to leakages, as highlighted by a state commission report in September 2024. Since 2014, Uisce Éireann has eliminated the discharge of raw sewage in 82 per cent of affected areas, recognised in the EPA's Urban Wastewater Treatment report in 2023, however, substantial sustained national investment is needed and crucial for upgrading wastewater infrastructure to meet upcoming standards.

Uisce Éireann is proactively tackling these issues through a series of strategic projects designed to establish a robust, climate-resilient water sector. International collaboration will be essential to realise these initiatives. Key projects include the Greater Dublin Drainage Scheme, which aims to deliver a new regional wastewater treatment facility and supporting infrastructure for north Dublin, Kildare, and Meath.

Additionally, the Water Supply Project represents a landmark in diversification and resource sustainability — marking the first significant upgrade to Ireland’s 'new source' infrastructure in over 60 years. This effort aims to reduce reliance on the River Liffey, thereby ensuring a resilient and diversified water supply for the future.

Uisce Éireann is proactively tackling these issues through a series of strategic projects designed to establish a robust, climate-resilient water sector.

Energy

Energy-related emissions in Ireland decreased by 8.3 per cent in 2023 to their lowest level in thirty years, according to Sustainable Energy Authority in Ireland. This was primarily driven by emission reductions in the electricity generation, residential, agriculture, and industrial sectors.

While a significant drop, this is not enough to meet national and EU emissions reduction targets. Ireland's 2030 target under the EU's Effort Sharing Regulations is to reduce its greenhouse gas emissions by at least 42 per cent by 2030 on 2005 levels; among other targets, Ireland’s national goal under its Climate Action Act is to achieve a climate neutral economy by 2050.

Ireland’s Climate Change Advisory Council’s (ICCAC) annual 2024 review states that the electricity sector needs to achieve the largest reduction in emissions of all sectors: a 75 per cent decrease by 2030, compared to 2018. EirGrid received €750 million in Budget 2025 to improve and decarbonise the national grid.

In 2023 electricity sector emissions fell by just over a fifth from 2022, to the lowest level since records began in 1990. This was driven by a major drop in the use of coal, oil, and peat for power generation, alongside a rise in cleaner imported electricity.

Generation from renewable sources such as solar and wind increased slightly but remains significantly below the annual increase needed to meet rising demand and 2030 carbon emission reduction targets. Delays and appeals in the planning process for clean energy projects “are significantly hindering progress,” CCAC said.

This is a cause for concern, particularly for offshore wind. Several planning applications for the first large wind farms were submitted in late 2024. Progress has been made, however, with the publishing of the terms and conditions of Ireland’s second offshore wind auction, associated with the first site of the South Coast Designated Maritime Area Plan (DMAP).

ROI’s public transport sector, particularly heavy rail, is transitioning away from fossil fuels towards electrification, creating further demand for low-carbon generation to be delivered. Iarnród Éireann is commissioning up to 750 electric and electric/battery powered trains for its DART+ Programme over a ten-year period. Once complete, this will represent the biggest investment in sustainable rolling stock in Irish history.

Transport

Under the Budget 2025, the Department of Transport will receive an additional €2.9 billion in capital funding, bringing the total allocation to €3.9 billion. This will enable the go-ahead for a raft of new public transport projects, including development of projects under the DART+ Programme, purchase of a new DART fleet, construction of charging infrastructure in Drogheda and progression of the procurement process for DART+ West.

Construction can also continue on train stations, such as the redevelopment of Galway Ceannt and on Phase 1 of the Cork Area Commuter Rail Programme.

Meanwhile MetroLink, the proposed €9.5 billion high-capacity, high-frequency rail line running from Swords to Charlemont, linking Dublin Airport, Irish Rail, DART, Dublin Bus, and Luas services, is set to create fully integrated public transport in the Greater Dublin Area. It is currently in the planning and consultation phase.

As well as integrating major transport hubs, MetroLink will connect key destinations including Ballymun, the Mater Hospital, the Rotunda Hospital, Dublin City University, and Trinity College Dublin. Much of the 19-kilometre route will run underground, transforming the capital’s public transport network.

Other national transport infrastructure that, under the Budget funding, can proceed includes work on major road projects such as the M50 Traffic Control and Management upgrade and N5 Ballaghaderreen to Scramoge. Projects at an advanced stage of planning, including the N21/69 Limerick to Foynes and M28 Cork to Ringaskiddy can also proceed.

Private sector

Encouragingly, in 2024, Ireland's Foreign Direct Investment (FDI) sector showcased both resilience and strategic positioning, attracting significant investment in key industries and maintaining its appeal as a European investment destination.

Direct investment into Ireland increased by €6.6 billion in the fourth quarter of 2023, while the annual rate of return on FDI investment in Ireland was 13.5 per cent, compared to 5.5 per cent on FDI investment abroad. This means foreign investors not only increased their investments in Ireland by a substantial amount in late 2023 but also enjoyed much higher returns on their investments compared to other places.

The combination of attractive tax policies, highly educated workforce and an open economy is expected to continue supporting Ireland's reputation as a favourable FDI destination in Europe well into 2025 and beyond.

That said, the Irish economy faced significant issues over the last 12 months. Global economic challenges, including slower demand in key markets and higher inflation, contributed to a drop in exports, especially from Ireland's vital technology and pharmaceutical sectors, which are largely driven by multinational corporations. As these exports declined, they impacted overall growth due to Ireland’s high dependence on these sectors.

2024 thus saw the continued reset of the commercial market, with foreign and domestic companies undertaking global reviews of their operations.

Notwithstanding this, the time lag between such decision-making and its impacts on the ground meant that 2024 was another strong year in terms of output value. However, the reset did start to have an impact during the second half of the year.

In the commercial office sector there has been a rise in the Dublin office vacancy rate through 2024 compared with 2023 as more developments reached completion and this trend is likely to continue into first quarter 2025. Looking forward to 2025 and beyond, we see continued demand for Grade A space and the repurposing of existing stock.

Retail and hospitality have also been strained. The cost of doing business, the rise of home working and the continued popularity of online shopping have challenged Small-to-Medium Enterprises (SMEs) and reduced footfall in city centre locations.

Construction output

ROI’s official measure of total public and private investment in the building and construction sector is measured as Gross Fixed Capital Formation (GFCF). This includes housing, commercial building, civil engineering, and public infrastructure.

According to the government's BUILD 2024 report (published July 2024), GFCF stood at €31.5 billion in 2023, a 6 per cent increase on 2022. The report also forecast GFCF to rise to €36 billion in 2024 as a whole and to continue growing through to 2027.

What are the factors driving this figure?

The fundamentals of the economy are good in terms of growth and budgetary position. This, combined with ROI's strong, active EU membership and continued deep economic and cultural links with the US, provides a positive backdrop for the construction sector. However, there are hurdles which must be overcome for this predicted growth trajectory to be realised in the coming years.

Resource constraints

Employment numbers in the industry have stalled in the last 18-24 months and this constraint is being felt in all areas of the industry. There has been a significant media focus on the shortage of trades people and the need to increase apprentice numbers, but there is also a less-reported undersupply of contractor management and supervision resources, and staff in professional services firms. This has, in some instances, had an impact on project progress, adding to project duration.

The allocation of these scarce resources is reflected in the level of Preliminaries on projects. Whilst every project is different and priced accordingly, from our benchmark data there has been a trend of a high level of Preliminaries over the last 24 months, albeit moderating somewhat in 2024.

Productivity

As highlighted by the Irish Fiscal Advisory Council at the end of October 2024, productivity in the construction sector is approximately 30 per cent below other European countries. This is due to a range of factors, including the cyclical nature of the industry and corresponding investment deficits, and the relatively small scale of firms in the sector. All of this points to adopting a programmatic approach, which requires a more consistent and visible pipeline of investment which in turn generates confidence to invest and increase the scale of businesses.

Construction delivery durations

Construction delivery durations are proving increasingly challenging due to a range of factors including resource challenges, the need for extended mobilisation periods, prolonged lead in times on procurement of key materials and equipment, the availability of sub-contractors and specialists, and their resources over the construction duration.

From analysis of a range of social infrastructure projects AECOM is managing in the education, healthcare, and social and affordable residential sectors, there is a clear programme advantage to delivering at scale.

Indicative construction durations for project scales are included in Figure 3. If we look at our projects through the lens of programmatic thinking — as explored in our main feature article — we can identify the benefits potentially attainable.

CAP24 names decarbonised heating, reduced embodied carbon and emissions from construction materials, and energy efficiency as measures "critical to success" if the built environment is to meet its 2030 decarbonisation KPIs.

Climate action

Solving for carbon

The built environment is making strong strides in adopting environmental, social, and governance (ESG) principles: decarbonising its products, processes, and practices to meet climate goals.

ROI’s position as an EU member state places expectations on public and private sectors alike to decarbonise. EU-wide measures are being rolled out, which must be adhered to. These include the Revised Energy Performance of Buildings Directive (EPBD), which requires all new buildings to be zero-emission as of 2030; and new buildings occupied or owned by public authorities zero-emission by 2028. In addition, the EU Taxonomy is driving sustainable finance and greater sustainability reporting requirements for industry.

Accounting for embodied and operational carbon is becoming increasingly important to the construction industry since the introduction of the government’s Climate Action Plan (CAP) in 2019 and its subsequent updates. The latest edition, CAP24, names decarbonised heating, reduced embodied carbon and emissions from construction materials, and energy efficiency as measures “critical to success” if the built environment is to meet its 2030 decarbonisation KPIs. These include, among other KPIs, cutting embodied carbon in construction materials produced and used by at least 30 per cent on 2018 levels.

Embodied carbon assessments are now a vital component in project business case development. Demand for accurate embodied carbon data is driving the development of dedicated ROI carbon data sources: for example, the Sustainable Energy Authority Ireland (SEAI) is building central carbon databases.

The Irish Green Building Council (IGBC) is participating in a pilot programme run across Ireland, Spain, and Czechia to improve the availability of quality carbon data, and IGBC's own Environmental Product Declaration (EPD) Ireland portal. The portal allows manufacturers of construction products to provide third-party verified information on the environmental impacts of their products. It also provides a platform for buyers and specifiers to source products with EPDs.

We are working across multiple projects in ROI delivering whole life carbon (WLC) and energy efficient design (EED) services to help clients meet these demands and successfully reduce carbon emissions. We have incorporated WLC and EED requirements to enable carbon reductions to be achieved across programmes of work.

Environment

Funding and action on biodiversity conservation and restoration in Ireland is “totally inadequate” and “underestimates the role of biodiversity in limiting climate change impacts,” according to Ireland’s Climate Change Advisory Council (CCAC). The statement, made in its 2024 annual review, also flagged “the grave risk that ecosystem collapse poses to Ireland’s food security, health and well-being, and economic development.”

Availability of biodiversity data in the country is poor, with no comprehensive picture of biodiversity in Ireland. What is known is that 85 per cent of ROI's EU-protected habitats are of ‘unfavourable’ status, i.e. in poor or bad condition. This is having negative impacts on wildlife: over 20 per cent of assessed species in Ireland are threatened with extinction. Some 30 per cent of the country’s semi-natural grasslands have been lost in the past decade, and more than half of native Irish plant species are in decline.

The CCAC called for the setting of ambitious targets and costed measures under the National Nature Restoration Plan; an urgent increase in funding for its National Biodiversity Action Plan; and the creation of a “credible plan” to protect at least 30 per cent of land and sea by 2030 (part of the 30 by 30 COP15 commitment). It also called for state and private sectors to support farmers with results-based financial incentives to enable them to adopt nature-friendly practices and enhance biodiversity on their land.

Targeted state funding is increasing. The Budget 2024 saw the launch of the Infrastructure, Climate and Nature Fund, with €2 billion per year committed to the Fund until 2030.

AECOM is working to mainstream Nature-based Solutions that support biodiversity. Our Playbook for Nature-positive Infrastructure Development, a project co-created with the WWF and FIDIC, is focused on supporting the transformation of infrastructure towards a nature-positive approach, placing nature and natural ecosystems at the heart of project design. Building with nature, as opposed to around it, is the key tenet of nature-positive infrastructure: for example, by designing infrastructure that slows down water flows during flood conditions or provides carbon capture.

Much of our work contributes to safeguarding Ireland’s natural assets. We support Uisce Éireann to provide safe, clean drinking water and protect water bodies and related ecosystems through wastewater management treatment services.

In general, Ireland’s economic resilience seems strong for the year, especially in domestic sectors, yet it remains sensitive to global economic shifts and geopolitical uncertainties that could affect multinational operations and overall trade balances.

Construction industry outlook for 2025

Trade dynamics with major partners, such as the US, are essential for Ireland. With a new US administration in place in January 2025, any new trade agreements, tariffs, or regulatory changes — particularly in data protection, digital services, and pharmaceuticals — could either open up opportunities, or create challenges for Irish exports and multinational operations.

Whilst the 2025 Budget included announcements of strong infrastructure investment levels, bolstered by the European Court of Justice ruling on Apple back taxes of €14 billion, it is expected that there will be some modification of the precise spending plans undertaken by the incoming government.

This may result in some re-profiling of expenditure across 2025 but we do not expect it to have a material impact. However, this lag is inevitable, and we do not expect it to have a significant impact long-term. Provided public finances remain strong, infrastructure investment should continue.

In this upcoming period of robust state funding for infrastructure, project sponsors must ensure that the incoming government understands and supports their projects and programmes and will champion them. It will be a time that calls for communication, collaboration, and education between public and private sectors to realise the ambitious pipeline of work we have ahead of us.

Looking at ROI’s construction industry prospects for 2025 and beyond, it is likely government investment in the residential sector will continue at the same strong, if not even higher level, given the unprecedented demand.

Another key indicator of the outlook for the industry is the data available from Planning Permissions granted. Acknowledging the time lag from grant of permission and construction activity, we have reviewed the high-level data over the last six years.

Notwithstanding the varying sector movements as highlighted in Figure 4, planning permission floor area granted in 2023 was at a similar level as in 2018. However, all sectors have demonstrated increases and decreases within this period, which is not surprising given that we experienced the coronavirus pandemic in the middle of this period.

The key trends to note are that residential represents over 60 per cent of the floor area granted permission. Residential had an approximately 10 per cent higher area granted permission in 2023 than in 2018.

The industrial sector has also seen strong activity, with demand for space increasing and vacancy rates continuing at low levels. Nationally, the area of industrial space granted planning permission in the first six months of 2024 was up 73 per cent on the same period in 2023.

Another positive trend from 2018 to 2023 is that granted planning in the health, education, and other social infrastructure sectors has risen significantly, at over 65 per cent in the six years — albeit these all start from a low base. Combined, they equate to approximately 15 per cent of the residential floor area. The overall floor area granted permission in the first half of 2024 was an estimated 3 per cent down on the equivalent period in 2023.

Overall, we anticipate a 5 per cent growth in volume of output in 2025. In general, Ireland’s economic resilience seems strong for the year, especially in domestic sectors, yet it remains sensitive to global economic shifts and geopolitical uncertainties that could affect multinational operations and overall trade balances.

Construction costs and tender prices for 2025

After a tumultuous number of years off the back of Brexit, the coronavirus pandemic, and the outbreak of war in Ukraine, 2024 saw a continuation of the reductions in the pace of tender price increases, which started in 2023.

The market has adjusted to these global factors, which impacted on the availability and cost of key elements in the supply chain and raw materials. We are now in a low inflationary period, with the CSO building materials index showing a 0.28 per cent increase over the 12 months to August 2024.

However, as an open economy, with large proportion of national income dependent on a small number of global businesses, ROI remains vulnerable to global shocks.

When considering local input costs, 2024 saw the formal introduction of the Price Variation Clause amendment to the public works contracts. This allows for contract price adjustments in response to fluctuations in the price of materials and fuel, and in some cases, labour costs.

Under ROI’s sectoral employment order, which sets the statutory minimum rates of pay for the construction sector, there was a 3.5 per cent increase in labour rates awarded in August 2024.

In this upcoming period of robust state funding for infrastructure, project sponsors must ensure that the incoming government understands, supports and champions their projects and programmes. It will be a time that calls for communication, collaboration, and education between public and private sectors to realise the ambitious pipeline of work we have ahead of us.

In terms of tender prices, 2023 saw the AECOM Tender Price Index moderate to five per cent. This downward trend continued through 2024, to a national average of four per cent.

Taking all these factors into consideration, the expectation is that construction costs and tender price inflation will continue in low single-digit percentages through 2025.

To learn our exact 2025 volume output and tender price inflation forecast, please download the report using the form at the top of the page.