Summary of the Euroconstruct report. December 2025
1. Situation and forecasts in Europe
The European construction sector will enter a phase of “new normality” in 2026
The macroeconomic environment in Europe is still far from optimal. While interest rates have fallen from their 2023 peaks and inflation has moderated, private investment remains subdued due to uncertainty, construction costs continue to be high, and the affordability gap is widening. Consequently, the European construction sector has opted to reduce its output, especially considering that it had reached record levels in 2022. This negative trend has extended from 2023 to 2024, and to some extent could also include 2025, which is projected to end with a virtually neutral balance (0.3%).
The outlook changes from 2026 onwards, and the sector is expected to enter a new phase of growth, at a rate that can be described as “normal,” ranging from the 2.4% projected for 2026 to the 1.9% projected for 2028. This change in the cycle is not so much due to a substantial improvement in the European economy, but rather to the fact that the construction sector itself will gradually abandon certain ultra-defensive stances it adopted in recent years as a strategy to cope with the uncertainty caused by the rising cost of credit and materials.
The country-by-country analysis provides more encouraging details. While the previous Euroconstruct report from June 2025 listed three heavyweights—Germany, France, and Italy—among the countries most struggling to recover from the 2023-24 recession, the current report shows that Germany is the only major market that will remain among the laggards. Meanwhile, the UK, Spain, and Poland continue to be at the top of the rankings, poised to benefit more from the expansionary phase of the coming years, having been less affected by the economic turbulence experienced by other countries.
New residential construction is the subsector where the change in pace described for the sector as a whole is most evident. The negative phase of the cycle has been particularly damaging to residential production, which bottomed out in 2024 after experiencing a cumulative drop of almost 17% compared to 2022. But after a virtually unchanged 2025, new housing is projected to accumulate 14.5% growth during 2026-2028. In the short term, this rebound is due to the fact that many developers have projects in very advanced stages of development that they had postponed in recent years. In the medium term, the measures that some countries are introducing to stimulate residential production should begin to bear fruit, given that housing shortages are fueling social unrest. Despite the strength of the recovery, the market volume in the 2028 projection is still below that of 2022, as there is still a considerable risk perceived when introducing new, increasingly less affordable housing into the market, even though margins are narrower.
New non-residential construction shows a flatter profile than residential construction. On the one hand, it has suffered a more manageable impact during the three-year period 2023-25, with production only declining by 4.2%. The forecast for 2026-28 is also more moderate, at 5.7%. These figures suggest that, if the forecast holds true, production in 2028 will slightly exceed that of 2022. However, this improvement will not materialize in all market segments, as there will be notable exceptions: industrial, logistics, and commercial construction, as well as offices, will still be 6% below 2022 levels in 2028. Clearly, these are highly strategic sectors for the market, and their weakness reflects how the secondary and tertiary sectors in Europe will continue to carefully manage their investments at a time when the economy remains fragile.
Civil engineering has not been affected by the contraction in the building sector, and during the period 2023-25 it has managed to accumulate growth of 11.6%. This strong performance is mainly due to long-term projects that have been declared strategic (energy and decarbonization policies) and which, as such, have received priority in public budgets and national reconstruction programs that, depending on the country, have been reinforced with European funds. In the short and medium term, there is concern that defense spending will gain priority in public investment policies, although certain types of military infrastructure could generate demand for civil engineering. This will contribute to a moderation of growth expectations for the coming years, meaning that the cumulative forecast for 2026-28 (7.4%) is lower than that of the previous three-year period.
2. Situation and forecasts in Spain
Housing will mitigate the effects of the end of the NGEU stimulus program.
In Spain, the construction sector has managed to avoid the contraction that has affected the European sector during the three-year period 2023-25. Spain’s exceptional performance has been related to the better performance of the economy, but above all to the modest levels of production which, unlike in many European countries, have not needed to be cut to survive the combined shock of inflation, increased credit costs and a drop in demand.
During 2025, both the residential and civil engineering sectors are performing strongly and continue to push the sector’s production capacity to its limits, although growth of 4.0% is still expected. The situation begins to become more complicated from 2026 onward, as the incentive program for certain types of rehabilitation and civil engineering projects will expire mid-year. Combined with production bottlenecks, growth will slow in 2026 (3.6%). Projections for 2027 are 3.2% and for 2028, 2.2%. This represents a controlled decline, thanks primarily to the fact that the housing boom may be here to stay. The gradual recovery of non-residential construction following the pandemic, and the completion of civil works related to the 2027 municipal elections, will also contribute to this growth.
Residential construction began to accelerate the processing of new housing applications in 2024, and this trend continued into 2025, which is not surprising given how easily the product is being sold. While construction benefits from the healthy real estate market, there are concerns that rising prices will further complicate affordability, exacerbating the social problem. Various levels of government are responding, and after a long hiatus, public housing may finally become a significant player in the Spanish market. However, it will be necessary to allow time for the projects initiated by municipalities and regional governments to bear fruit. All of this positions residential construction as the fastest-growing segment of the sector, capable of growing by 6.9% in 2025 and maintaining growth between 5.5% and 6% during 2026-2028.
In 2025, the non-residential construction sector is witnessing a surge in investor appetite extending to commercial and industrial real estate. Thanks to the extra economic growth of recent years, Spain has gained a competitive edge over other investment hubs, an advantage that, for the moment, is not particularly threatened. In this context, it makes sense to increase the flow of projects, albeit selectively. The market niches expected to show the most expansion are logistics (regaining its characteristic prominence) and retail (after several years of very low activity), while offices seem determined to follow their own cycle, which is lagging behind the rest. The forecast anticipates only minimal growth in 2025 (0.8%), which would reach between 2% and 3% by 2026-2028.
In the rehabilitation sector, the anticipated “rehabilitation wave” expected from the NGEU stimulus program has arrived late (2024), and projects now face very tight deadlines for completion (August 2026). This raises questions about whether the bottlenecks in this labor-intensive construction activity can be overcome. In any case, the biggest unknowns are whether the existing interest in energy-efficient renovations can be leveraged once the subsidies expire. As more stabilizing factors, non-residential and more cosmetic residential renovations have reasonably optimistic prospects. A dynamic real estate market typically encourages maintenance and renovations. We anticipate annual growth rates of between 1% and 2% for the period 2025-27.
Civil engineering has also benefited from NGEU funds to grow during the challenging three-year period of 2023-25, and is now awaiting the outcome of the Plan’s final phase. For the moment, there are no signs of a rough landing. Aside from a respectable volume of work already underway, projects have been processed throughout 2025 at almost the same rate as in 2024. These could be partly last-minute NGEU projects, combined with the first municipal works in anticipation of the 2027 elections. This provides no reason to expect production to decline in 2025 (3.0%) or 2026 (2.0%). From 2027 onward, the withdrawal of NGEU funds will negatively impact rail, leaving energy as the major driving force. Projections still anticipate sufficient momentum in 2027 for minimal growth (1.1%), but this will run out in 2028 (-1.8%). This scenario may be altered if there are profound changes in budgetary policy, for example, to accommodate more investment in defense.
3. The next appointment for monitoring the sector
Euroconstruct Helsinki, June 2026
The next Euroconstruct conference will be held in Helsinki on June 4 and 5, organized by Forecon, the Finnish member of the group.
As usual, experts from the 19 countries in the Euroconstruct network will present their findings on the sector’s progress, along with their outlook to 2028. The final program will be available at www.euroconstruct.org
