Construction industry in Germany: Stabilization and upswing expected!

Construction industry in Germany: Stabilization and upswing expected!

Linesight's Construction Markets Insights Report predicts an upturn in the EU construction sector as the European construction industry shows signs of stabilizing after a difficult 2024. Germany in particular is ranked in the middle of Europe with expected growth of 0.9% in 2025 and 2.9% in 2026. This growth is supported by a comprehensive infrastructure package from the federal government worth 500 billion euros. The moderate development of construction costs is helping to stabilize prices for key building materials such as copper, steel and diesel.

The data center market in Germany, which is described as dynamic, is developing particularly positively. IT capacity is expected to increase to 3.3 GW by 2029, a jump from 1.3 GW in 2024. Frankfurt remains the center of data center development, while the Rhine-Main area, Berlin and the Rhineland are also being developed. In addition, 88% of the electricity for German data centers comes from renewable energies.

Global challenges and opportunities

Regardless of the positive developments in Germany, the construction industry presents a complex picture worldwide. How xpert.digital reported, growth and challenges vary regionally. While the housing sector is stagnating in many developed economies, the infrastructure sector is experiencing an upswing thanks to government investment programs. This is also reflected in Germany, where a real sales decline of around 3.5% is forecast for 2023, before a slight slowdown is expected in the following year.

The mood in the German construction industry is showing a slight improvement. Nevertheless, it remains subdued, especially in residential construction, which has been severely affected and is suffering a double-digit percentage decline in sales. The number of completed apartments is well below the federal government's target of 400,000 new apartments per year. High construction and financing costs as well as regulatory hurdles place additional strain on housing construction.

Infrastructure and renewable energy

Infrastructure spending, on the other hand, is on the rise. Germany plans to build over 10,000 kilometers of new power lines and modernize 7,000 kilometers of existing networks by 2032. These investments are part of the EU's decarbonization strategy, which aims to increase the share of renewable energy to at least 42.5% by 2030. In Spain, new lines are being planned over a length of around 5,000 kilometers, which will further promote cooperation within the EU.

The challenges facing the construction industry are inevitable: a shortage of skilled workers, rising construction costs and geopolitical uncertainties are putting a strain on the profitability of construction projects worldwide. More than half of construction companies in Germany have difficulty filling vacancies. In addition, the number of bankruptcies in the construction industry has increased. In the EU as a whole, construction production presents a mixed picture, with a slight increase in the Eurozone while the EU as a whole experiences a decline.

The EU reconstruction funds identify infrastructure projects as a key growth driver that is likely to be of central importance in the coming years. Despite all the challenges, the construction industry is a fundamental pillar of the global economy that could continue to develop dynamically in the future.