Summary of the Euroconstruct report. June 2026
1. Situation and forecasts in Europe
If costs do not get in the way, the European construction sector aspires to grow by 2% in the coming years
Production in the construction sector has stagnated in Europe in 2025 (0.2%), which is an improvement after two consecutive years of contraction. This negative parenthesis has not been excessively dramatic, taking into account that the sector was operating at fairly high levels of production and that the cumulative loss of production has been limited to -2.5%. In any case, the latest Euroconstruct reports suggested that the sector would return to growth in 2026, which at the time we described as a return to normality.
The new crisis caused in Iran comes at a cautiously positive time for the European sector. The year 2026 has started with a large portfolio of work, the product of investment decisions taken prior to the Middle East conflict. There is no doubt that the risks have increased, but not to the point of invalidating a scenario of short-term growth in line with the winter report. Understandably, it has been necessary to revise the forecast downwards to 2% by 2026.
The sector has been operating in a high-price environment for a couple of years now, so another cost shock would be a very significant disruption. The central scenario, subject to high uncertainty, is betting on a shorter and lighter inflationary episode than the one experienced in 2022. If these circumstances are met, the forecast for 2027 points to 2.2%, and the projection for 2028, to 1.9%.
In the analysis by country, by separating the markets that have no possibility of growing around 2% from those in a position to surpass it, a 60-40% distribution is obtained in terms of market share. This indicates that positive exceptions are abundant, but they are still surpassed by negative ones. And it is that in the group of countries with difficulties there are still three heavyweights such as Italy, France and Germany. Spain is among the markets that aspire to grow slightly above the average, a situation it shares with the United Kingdom and most of the Nordic countries.
New-floor residential construction is the subsector that has suffered the most contraction in the last three years: at the end of 2025, production was 17% below that of 2022. This slowdown in production has had an impact on the supply of housing in Europe, revealing worrying deficits in several countries where prices are penalising affordability in both the purchase and rental markets. Developers have waited until 2026 to start recovering lost ground, and a three-year period 2026-28 is expected to see clear growth, at around 4.5% per year. Although this is the largest growth figure expected between the different subsectors, it will not be enough to recover the levels of 2022. Although the European market is beginning to leave behind the extremely cautious stance of recent years, the right conditions are not yet in place to start a new truly expansionary cycle.
Non-residential buildings have also experienced difficulties in the recent past, albeit of a different nature than housing. Both subsectors declined during the pandemic, but while housing recovered strongly and contracted again, non-residential housing settled in a phase that has oscillated between stagnation and very modest growth. Interestingly, demand does not disappear, but evolves towards another pattern in which companies prefer to sacrifice surface area rather than give up quality or location. The end customer not only becomes more demanding, but also moves from some classic niches that are going through turbulence (industry, offices) to others that are more expansive (health, defense). The forecast contemplates more growth than in recent years, but the bar is not too ambitious: 1.9% per year on average for the three-year period 2026-28.
Civil engineering is immersed in its own cycle, much more placid than that of construction. This phase of growth began in the middle of the last decade, when most countries became aware that austerity in infrastructure was penalising their own competitiveness. With nuances, the slogan has remained in force until now and has been transferred to production in civil engineering, which has recorded a cumulative growth of 12% between 2022 and 2025. For the coming years, no change of direction in public investment policies is expected, but an erosion in the investment capacity of states is expected, as a result of rather modest economic growth. The forecast shows a slowdown scenario, in which growth is expected to go from 3.3% in 2026 to just 1.5% in 2028. The transport infrastructure will be the one that will undergo the most adjustments. On the other hand, water and energy infrastructures will remain expansionary as countries try to correct their strategic vulnerabilities.
2. Situation and forecasts in Spain
The sector still has an upward trajectory, but it will cost more to continue growing
The Spanish construction sector has been clearly performing well above European averages since 2023. Production in Spain grew by 4.3% in 2025, bringing the cumulative growth since 2022 to 9.8% at constant prices. In the same three-year period, the production of the aggregate Euroconstruct has fallen by -2.3%. The obvious question is: how long will this exceptionality last?
For the time being, this extra boost could be maintained during 2026, although the differential with the European average will be less pronounced. The forecast contemplates growth of 3.2%, losing intensity compared to 2025 because in the third quarter it should already be noted that the projects financed with the Next Generation EU (NGEU) funds are coming to an end, despite the fact that the Simplification Addendum has added more flexibility to the timetable initially agreed with the EU. As 2026 progresses, the impact of the conflict with Iran will also become more evident. Of particular concern is the increase in the price of some construction products, which has already begun to be noticed.
For the following years, the chances of the Spanish construction sector continuing at a higher rate than those in Europe are diminishing. We envisage a scenario of a slowdown in production in 2027 (2.4%) and 2028 (1.8%), so that growth rates would once again be comparable to those of most markets on the continent. This decline will be quite cushioned by new housing (which is trying to correct the significant accumulated deficit) and by civil works related to the 2027 municipal elections (which will provide only temporary relief).
Residential construction has its advantage that the market absorbs without difficulty all the product that is offered in areas of high demand and, increasingly, also in neighboring areas. The deterioration of the economic climate could deter some private developers, who are attentive to whether sales prices reach a ceiling, which would leave them with no margin to absorb another rebound in costs in the short term. The counterpoint could be provided by public promotion which, after having created abundant expectations, cannot afford to back down without paying a political price. The new State Housing Plan (PEV) 2026-2030 has been well received by stakeholders in the sector, who value prioritizing the allocation of funds to direct aid for the construction of subsidized housing. As in Europe, the most expansive forecasts correspond to residential construction: 5% growth for both 2026 and 2027, 4.5% for the 2028 projection.
Non-residential buildings are also receiving positive signals from the real estate market. Despite this, the flow of new projects remains very static. Most commonly, new developments are built outside the central areas, which adds an extra risk that not all developers are willing to assume. It is in the offices where this atmosphere of extreme prudence is most perceived when promoting new floor space. The predisposition is greater in the niches of logistics, commerce and those related to leisure. The new forecast revolves around the idea that, despite the greater economic uncertainty, the Spanish non-residential subsector will not enter a recession, bearing in mind that the discreet production of recent years has not generated excess stocks. The forecast for 2026 is limited to 1.5%, with the possibility of reaching 2% in 2027-28, partly due to the fact that the market is betting on promoting high-performance products.
On the renovation side, the sector is waiting to see the quantity (and quality) of demand that remains after the end of the NGEU stimulus program. They are hopeful that the landing will be soft for residential renovation, on the one hand because they are confident that the PEV will take over, and on the other, because the powerful revaluation of housing continues to provide arguments for investing in renovation. In the non-residential context, the demand for renovation is also in good health. It is a symptom that the real estate market is stocking up on existing buildings that make sense to rehabilitate because after a change of use, or after repositioning the asset in a higher quality segment, it is possible to access a more ‘premium’ client willing to pay higher rents. However, renovation will not be able to avoid the general slowdown, going from 2.9% planned for 2026 to 1.3% by 2027-28.
The civil engineering subsector was understandably worried about the end of the window of opportunity for NGEU funds, but now the war in the Middle East is adding pressure for rising construction costs. In this type of situation, Spain is a vulnerable market because the vast majority of public works are contracted at a fixed price without review mechanisms. The sector warns that, unless exceptional measures are applied as during the inflationary crisis of 2021-22, the works will be paralyzed again. Fortunately, 2026 has begun with a portfolio of work in line with previous years, and in recent months it has benefited from the extra flow of municipal projects that have been awarded with a view to the spring elections of 2027. This still allows us to forecast a moderately expansionary 2026 (2.0%). From 2027 onwards, with NGEU funds exhausted in the railway chapter and with the usual retraction of civil works after the elections, the slowdown will have a more severe nuance than what we have proposed for construction. We do not expect growth in 2027 (0%) and production could contract in 2028 (-1.9%).
3. The next appointment for monitoring the sector
Euroconstruct Vienna, November 2026
The next Euroconstruct conference will be held in Vienna on November 19th and 20th, organized by Wifo, the Austrian member of the group.
As usual, experts from the 19 countries of the Euroconstruct network will present their conclusions regarding the monitoring of the sector’s progress, together with the outlook until 2029. The final program will be announced in www.euroconstruct.org
