A look at the construction trends in Europe in 2023 – and what could happen in 2024
The construction sector in Europe was characterised by a number of trends in 2023. While residential construction fell sharply in several countries, construction increased in other areas, such as logistics and public buildings.
At the same time, the entire construction sector continued to adapt to increased demand for sustainability and energy efficiency. The outlook for the European construction industry in 2024 shows a continuing mix of challenges and growth opportunities.
Housing construction hit by higher interest rates and costs
The number of building permits granted for new housing decreased in several countries in 2023, including in Austria, Belgium, Germany, the Netherlands, France and Sweden. This was largely attributable to higher interest rates and construction costs, as well as the end of housing subsidies for new construction in some countries. Higher property prices and weaker household finances have dampened the previously buoyant housing market. However, the number of residential building permits increased in Spain, continuing a trend seen in recent years. Residential construction is expected to remain under pressure in 2024, especially in countries in which building permits have declined significantly. At the same time, Spain’s increased number of building permits could be a positive indicator for that country’s construction sector.
Ireland’s construction sector had the best year
Ireland recorded the strongest growth in the construction sector among 19 European countries. The country was predicted to have expansion of 3.2% in 2023. This differs markedly from the rest of Europe, where a general decline in construction output was recorded. The total output of the European construction industry was expected to decrease by 1.1% in 2023. This was due to factors such as inflation, higher interest rates and a slowdown in the global economy.
E-commerce, education and health provide support
In the case of non-residential construction, the statistics do not show such a large decline in the number of building permits issued. Building permits in square metres actually increased slightly in the first quarter of 2023 compared to the same period both one and two years earlier. One driver of this increase was the boom in e-commerce, which increased the demand for new logistics centres. Public expenditure on education and health facilities also stabilised.
Hybrid work puts pressure on the office sector
The office building sector saw a slight decline in building permits issued. Uncertainty about the future of working from home and increased cancellations of rental contracts contributed to this trend. However, there is possible future demand for the reconfiguring of offices to adapt them to new working methods, such as hybrid working. But it is uncertain how this will affect the sector in the short term.
Increasing focus on sustainability and energy efficiency
The energy crisis and the current geopolitical situation had a significant impact on the construction industry, in particular in terms of higher prices for construction materials. There was also a growing awareness and demand for energy-efficient buildings, especially in countries like Germany. This trend reflects a growing focus on sustainability and energy efficiency in the construction sector. Considering the ambitious climate targets set by the EU, this trend is likely to continue.
2024 characterised by continuing uncertainty
The outlook for the European construction industry in 2024 has a continuing mix of challenges and growth opportunities, in line with the trends and situation observed in 2023: Ireland’s construction sector is expected to continue to grow, with predicted growth of 4.4% in 2024. This positive trend in Ireland appears to be an exception to the more general slowdown in construction activity across Europe. The overall European construction industry is not expected to recover to pre-pandemic levels until 2025. This indicates that while there may be some improvement in 2024, the sector will still face many challenges.
The trend towards more energy-efficient and sustainable construction projects is likely to continue, due to the EU’s overall climate goals and a growing awareness about energy efficiency among consumers and businesses. Commercial construction, especially relating to logistics and public buildings, may continue to see stable or increasing demand, driven by changing consumption patterns and public investment. The market for office buildings could continue to be uncertain, depending on how work trends such as hybrid and home working develop. This may affect the demand for new office buildings as well as the need for renovation of existing office space.
Sources
Regarding Ireland’s strong growth in the construction sector:
EY Ireland - Euroconstruct Report
Regarding the general decline in European construction output and the outlook until 2025:
BDC Magazine - European Construction Forecast
Regarding trends and influencing factors in the European construction sector, including the energy crisis and sustainability:
GMK Center - Construction in the EU 2022-2023
Regarding developments in residential construction, non-residential construction, and office buildings:
ING Think - Europe’s Construction Sector
