Commercial building cost inflation eases to third of pre-Covid levels

The rate of inflation for commercial building costs eased last year to 2.2 per cent, to about a third of the level of 2019 before the Covid-19 pandemic, according to the Society of Chartered Surveyors Ireland (SCSI).

The SCSI’s latest tender price index showed that construction price inflation increased by 1.3 per cent in the second half of 2020, a modest increase on the 0.9 per cent recorded in the previous six months. The index excludes residential construction prices.

Tomás Kelly, chair of the quantity surveying group in the SCSI, said the figures reflected the massive impact Covid is continuing to have on the construction sector.

“While national tender price inflation had begun to moderate in late 2019, Covid quickly became the dominant issue, leading to a further reduction in these figures in [the first half of] 2020,” he said.

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“While the second half of 2020 saw a slight upward shift in tender inflation sentiment, this was largely due to the reopening of the sector following the easing of Covid restrictions during the summer. From then until Christmas our members reported that the sector was highly active, with many public and private projects advancing to tender and contract stages.”

He said the virtual closure of the construction sector in early 2021 has significantly dampened activity over the last number of months.

“The impact of the ongoing partial lockdown is likely to slow the return to normal construction activity over the coming months. The lockdowns and the continuing fallout from Brexit also make cost predictions more challenging, but based on what we are seeing in the market and certain material price increases on steel and timber products, our forecast is that inflationary pressure will be in the range of 1 per cent to 2 per cent for H1 2021,” Mr Kelly said.