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Ireland's turnaround is starting to bear fruit

Tom Fitzpatrick

The Irish construction market is expected to be worth almost €20bn this year and as its economy moves from the panic of a decade ago towards sustained growth, UK companies are looking west.

Breedon this week said the decision to spend £455m on Lagan Group was, in large part, because it wanted to enter the “attractive” Irish market.

Its group CEO Pat Ward said Breedon would now benefit from strong economic growth in both the Republic of Ireland and Northern Ireland, where Lagan is headquartered.

The Irish market mirrors that of the UK. It needs more homes, more skilled workers and better infrastructure, and its prospects are entwined with foreign interests in Brexit and investment.

UK companies are already targeting Ireland for work. Architects are working with local authorities including Dublin City Council on new housing solutions. Financiers are moving back into the country they abandoned when the global financial crisis struck.

At the Opportunity Ireland conference in Manchester last week, Bank of Ireland property finance director Brian Gaffney said it will lend €1bn in the construction finance and development market this year, having only re-entered the sector in 2014.

Ireland had a record year for office take-up in 2017, with 4.3m sq ft filled according to agents Lambert Smith Hampton – an increase of almost 20 per cent on the five-year average.

A further 2.7m sq ft of new office space is due to be completed in the next two years and is almost 50 per cent let, with prime rents still on an upward curve.

Savills Ireland chairman Roland O’Connell told the conference that Dublin was adding commercial office space at a rate only surpassed by Paris, London and Warsaw in Europe.

Infrastructure too, is at the heart of the Irish government’s Project Ireland 2040 report, which it wants to serve as an overarching guide to development over the next two decades.

Important arteries connecting Cork and Limerick, a metro system and airport expansion in Dublin are among the major projects planned.

For decades, US pharmaceuticals and now tech giants have made Ireland their home, benefiting from advantageous tax rates while boosting employment and local economies.

Facebook and Google employ more than 10,000 people in Dublin, also home to Twitter’s largest office outside the US. Biochem and tech giants including companies like Apple and Pfizer have continued to set up shop in cities like Cork, Limerick and Galway.

They are helping drive the property market in Dublin, where rental growth (and subsequent frustration for home seekers) is rivalling that of London.

But while there’s plenty of cause for optimism, Donald Trump and Brexit are among the industry’s concerns. The president’s efforts to lure US firms home through his tax reforms and concerns over the post-Brexit border with Northern Ireland both pose significant threats to growth.

It’s hard to see a satisfactory conclusion to the border question, at present, but US firms have continued to invest in Ireland’s cities since Trump’s planned reforms came to light last year.

Debates over high-rise as a solution to housing constraints and the role Nama (the bank set up to tackle toxic debts in 2009) should play in property development continue to rage.

But Breedon’s acquisition is a show of faith and gives the materials giant a strong foothold there.

Now it’s up to Ireland’s construction and property industry to show it’s learned from the mistakes of the past, that it can move on from the catastrophe of global recession to become a mature industry, home to foreign investment and domestic growth.

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