Construction

The construction industry is experiencing significant ongoing changes, driven by overarching global trends as well as distinct regional market conditions. While digitalization, automation, and sustainability drive innovation across the sector, the individual regional markets face unique challenges and opportunities.

Global Drivers for Change

Across the industry, there are three key forces currently reshaping the construction industry:

Digitalization & Automation: Technologies like Building Information Modeling (BIM), IoT-based monitoring, and AI-driven project management are optimizing workflows, improving efficiency, and reducing costs.
Sustainability & Green Building Standards: With increasing regulatory and societal pressure, companies are adopting circular economy principles, energy-efficient designs, and carbon-neutral construction materials.
Resilience & Supply Chain Adaptation: Disruptions in material availability, fluctuating costs, and skilled labor shortages require companies to rethink traditional supply chain models and embrace more agile, decentralized production strategies.

These trends are neither new, nor do they cause sudden disruptions. Nevertheless, they gradually change the market and generate the need for companies to adjust their offering and approaches.

Regional Market Dynamics

Beyond global advancements, the construction industry is generally fragmented and characterized by regional and local markets which are subject to specific challenges including country-specific factors, or situations in certain metropolitan regions. In Central Europe, the building construction industry has been experiencing a full-blown crisis since the second half of 2023, continuing throughout 2024. The main drivers of this situation are:

High interest rates that have increased financing costs for developers and homebuyers.
High material and labor costs, squeezing margins and delaying projects.
Reduced government funding programs for residential and commercial projects, making investments less attractive.

An example indicator of the crisis situation in Germany is the number of building permits. In 2024, the number of approved building projects declined by 16.8% compared to the previous year, marking the third consecutive year of decline.

However, the fundamental demand for residential and commercial real estate remains high, and the increased energy costs are also driving the need for refurbishments. Together with the ongoing decrease in interest rates by the European Central Bank, the construction market is expected to recover. However, the speed of recovery may be slow due to the heavy bureaucratic burden and the long lead times from planning and permitting to execution.

In view of the current weak situation and the positive outlook, it appears that now is the right time for players in the market to revisit the strategy and current position and prepare for the future.