Almost two thirds of construction firms here are operating at full capacity, a new report from the Society of Chartered Surveyors Ireland (SCSI) has found.
Despite the capacity constraints, over half of businesses in the sector expect their workload will rise over the next year.
The latest Construction Market Monitor Report compiled by the SCSI and PwC also found that rising costs and shortages in the supply of labour are putting the viability and affordability of construction projects under significant pressure.
Firms also reported that development finance is becoming more difficult to source because of the increases in interest rates by the European Central Bank over the past 11 months.
"Surveyors ranked 'viability of projects' as the number one reason for the difficulties associated with raising development finance, followed by access to bank finance/credit and access to equity/venture capital," said President of the SCSI, Enda McGuane.
"According to our members, the hike in interest rates has become a key reason why access to finance is becoming increasingly difficult to acquire."
"The higher interest rates are affecting exit yields and thus making more projects unviable. When you combine these pressures with high inflation rates as well as more localised challenges around the availability of skilled labour and operating capacity, the pressure on feasibility and ultimately the viability of some projects is clear."
44% of those surveyed said the availability of finance and the lack of sufficient grant funding are also having negative consequences for the ability to reach the targets in the Government’s National Residential Retrofit Plan.
While 41% pointed the finger at labour supply shortages as a reason why these targets may not be met.
"The industry has a great opportunity to lead the way in terms of achieving climate action goals," said Sinead Lew, Partner, PwC Ireland Real Estate practice.
"However, feedback from the survey indicates that the current retrofitting support grant is not sufficient to ease the cost involved."
"It also highlights that the gap between the cost to retrofit and the market value on completion can be challenging. More needs to be done to encourage a wider take-up of retrofitting."
The sector is also struggling with the time and cost associated with upskilling existing staff to use digital technology and this is holding back adoption, the monitor found.
"According to the member survey, the current cost of investment is high, particularly when compared with return over the short term," said Mr McGuane.
"The risk of low returns during an uncertain market is particularly difficult for SMEs to consider. In order to capitalise fully on the opportunities which, exist in the market, it is critical that the Irish construction industry continues to foster a culture of innovation and digitalisation and that it is supported and incentivised to do so."
"Addressing the slow rate of technology adoption will be key to tackling some of the current constraints within the industry, such as labour shortages, operational capacity, and productivity" he concluded."
Despite the challenges, 7 out of every 10 chartered surveyors believe the overall outlook for the construction sector is positive.
More than a third of respondents said they expect an increase in their firm's headcount, while 59% think it will remain the same over the next twelve months.
25% said they expect profit margins to increase – down from 41% last year – with 54% predicting it will stay unchanged.
Over 150 chartered surveyors took part in the survey which was conducted last month.
