Summary of the Euroconstruct report. December 2024
1. Situation and forecasts in Europe
Half of the European market returns to growth while the other half continues to struggle
The signals coming from the European construction sector can be ambiguous. On the one hand, between 2023 and 2024 it has accumulated a drop in production of -3.7%. Despite this setback, the production of 2024 is comparable to that of 2019, which at the time was the best year after the crisis of 2008. Seen this way, the diagnosis is not overly dramatic: at a time of rising costs, increase in funding and anxiety in real estate markets, it is understandable that the sector cannot keep producing at such high levels, oblivious to all these headwinds.
Now that dramatic inflation or monetary policy surprises are no longer expected, the sector is entering a phase with fewer obstacles to growth. But the improvement will be slow: the new forecast for 2025 (0.6%) can be described as stagnation, and the projections for 2026 (1.8%) and 2027 (1.7%) do not envisage exceptional progress, only similar to the expectations for the European economy as a whole.
Growth rates suffer because the list of countries that will need more time to recover includes three of Europe’s largest markets: Italy, France and Germany. These countries are responsible for practically half of the production of the entire European sector, with which their difficulties have a very strong impact on the European growth averages. The other half of the market, which includes Spain, will advance at rates of around 3% per year throughout the period 2025-2027.
By now, it is no longer a surprise that most of the growth problems in the European sector come from residential construction . Most countries have had to reduce the rate of production in order not to fill their markets with homes that have borne exceptionally high construction costs, at a very complicated time to reflect them on the final price. European promoters have not hesitated to adopt defensive positions, as reflected by the significant declines in 2023 (-10.0%) and 2024 (-9.1%). The forecast for 2025 presents a flat profile (0.2%) but that is actually the product of five countries in which the contraction continues (among which there are France, Italy and Germany) while in fourteen others it is expected already a clear recovery capable of propelling them to more than 5%. By 2026-2027, the negative exceptions will be reduced in Italy and Germany, so the European growth average will improve significantly (3% to 3.5%), but will still hide a good number of countries that aspire to maintain rates in the range of 4 to 5%.
For non-residential construction , the 2023-2024 biennium has also been a negative bracket, although not as severe as in the case of housing. It is not that this market has been less sensitive to movements in interest and construction costs, but rather that it came from a time of production that was much less intense than that of housing, with which there have been enough with the adjustments in 2023 (-2.4%) and 2024 (-2.5%) to bring the risk level back to a more bearable position. Although not all countries will start at the same time, the European aggregate is expected to grow minimally already in 2025 (1.1%) and continue to improve gradually in 2026-2027 (1.5 to 2.5%). Looking at the three largest market niches, the strongest growth is expected in commercial construction, although it will only serve to make up ground lost in the years of contraction. Industrial construction will be the opposite: not much growth is expected, but it will impact on a market that has suffered fewer setbacks. Finally, offices will not return to growth until 2025, leaving them in a four-year recession.
In civil engineering , the year 2024 (1.1%) has been somewhat disappointing if we compare it with the expectations of the June Euroconstruct report (2.2%) or with the firm growth of 2023 (4.4% ). The epicenters of the worsening have been the countries of the East and the road infrastructure niche. On the other hand, it does not seem that this deceleration is the forerunner of a change in the cycle, with which the forecast for 2025 (2.5%) is once again betting on civil engineering growing at a faster rate than GDP. In the 2026-2027 projection, the idea of ​​a progressive erosion of public investment capacity begins to take hold, which would limit growth to a fork between 1.5% and 2%. As we have observed in recent years, the energy segment is the one that concentrates the most expansive forecasts. With nuclear energy regaining prominence, it is estimated that the construction aimed at the energy market can accumulate a growth of 14% between 2024 and 2027. In addition, by 2024 it has already managed to overtake the railway, which until now it was the second niche in size after road infrastructure.
2. Situation and forecasts in Spain
Housing will provide an extra boost to the sector
The recent behavior of the Spanish economy has been described as “surprising” because of the way it has resisted in a clearly unfavorable environment. In contrast, the construction sector has not been able to keep pace with GDP, mainly due to higher construction costs and financial costs following the invasion of Ukraine. This is the pattern we see for the close of 2024: construction growing at 2% while the economy approaches 3%.
Despite this, for 2025 we foresee a change in the guideline. The relief provided by interest rates and the stabilization of costs, plus the imminent closure of the window of opportunity for the Next Generation funds, have contributed to an upswing in the project portfolio during 2024. All this creates the conditions for production to grow by 3.5% in 2025 and eventually show more momentum than GDP. It is not entirely clear whether the sector will have enough productive capacity to meet the extra demand, but if this threat does not materialize, we see it as feasible for the sector to maintain these growth rates also in 2026 (4%) and 2027 (3.5%)
Most of the responsibility for this upswing falls on residential construction . Both private and public developers seem to have interpreted that now is an opportune time to increase the scarce supply of new-floor housing. The private sector has been the first to take the initiative, seeing how demand has reacted positively to the rate cuts. Public promotion operates with less agility, but in view of how housing has become another political battleground, it risks suffering the consequences of a manifest breach of the substantial promises made around the affordable housing The estimate for 2024 is 2.8% growth, assuming that the real change of pace will be felt from 2025 onwards. For the period 2025-2027 we foresee annual growth in the range of 5 to 6%.
The behavior of the non-residential market presents substantial differences compared to the residential one. Certainly, the inflection of interest rates has contributed to stabilizing incomes and stopping depreciation in some key niches such as offices, shopping centers or logistics. But before launching new projects, promoters seem to want to make sure of how much demand there will be in this new scenario, and in which niches it will be concentrated. Although the normalization of the economy, the financial health of companies and reduced surface stocks suggest that production should pick up with some intensity, we have maintained essentially the same “wait and see” key forecast that we published in previous Euroconstruct report. We envisage a slightly recessionary 2024 (-1%), with only modest improvements for the period 2025-2027, between 1 and 2.5%.
In the rehabilitation market, the news about the revaluation of real estate assets and the strength of the demand, as they create good conditions for investing in existing buildings. But the factor that should be transforming this market is the aid program paid for by the Next Generation funds, which so far is producing modest results. Proof of this is that it was necessary to wait until 2024 for the visa statistics to reflect progress minimally proportional to the expectations created. The forecast is in the range of 2 to 2.5% in 2024-2025, and around 1.5% in 2026-2027 due to the exhaustion of the subsidy schedule.
Regarding civil engineering, they were planning a couple of risks: that the public promoters would end up giving up on executing all the work that had been abandoned due to conflicts with cost increases, and that the subsidized projects through Next Generation would run out. The evolution of tenders and procurement suggests that the administrations continue to bet on extracting as much potential as possible from the Recovery Plan before its terms expire. Therefore, demand has not yet exhausted its inertia and it seems feasible to end 2024 with a growth of 3.1%, and maintain a similar speed in 2025 (2.7%). The projections for 2026-2027 have extra uncertainty due to the overlapping of several factors: the end of Next Generation, the municipal elections and the containment of the deficit in public budgets. At the moment, we see no reason to anticipate a sharp reaction in 2026 (2.4%), but we think it prudent to introduce the idea that it will be difficult to maintain these growth rates in 2027 (1.4%).
3. The next appointment for monitoring the sector
Euroconstruct Warsaw, June 2025
The next Euroconstruct conference will be held in Warsaw on June 6, organized by PAB, the Polish member of the group.
As usual, the experts from the 19 countries of the Euroconstruct network will present their conclusions regarding the monitoring of the progress of the sector, together with the perspectives until the year 2027. The final program will be announced at www.euroconstruct.org
