Germany market intelligence: facing an uncertain future with confidence
The German construction industry is seeing a slowdown and regression in new projects and in construction cost escalation. This is the result of 2023 getting off to a slower start, with the prospect of a national recession and further construction contraction looming.
Further increases in construction costs, accompanied by rising interest rates, have been reflected in the cooling output. However, there is a potential upturn on the horizon.
Despite the challenging market conditions, our first Germany market intelligence report indicates that although the forecast and economy is slowing, there are sectors of recovery, and a regression of construction prices after two years of extremely high construction escalation.
Market conditions are cooling
The current market sentiment is that tendering conditions are cooling, with contractors noting a reduction in tendering activity. The previously overheated market has slowed somewhat and is expected to continue.
The volume of building and construction permits decreased by over 20 percent over 12 months in Germany in 2023, compared to 2022.
As inflationary pressures ease towards the end of 2023, Germany’s construction industry should hopefully see increased volumes of activity.
Uncertain pricing
As activity levels tail off, do not assume construction prices will fall. With the German economy slowing, it is tempting to assume that tender price inflation will drop as client demand cools.
Rising construction costs have had, and are continuing to have, a major influence on pricing. Over the past two years, construction costs have risen well over 30 percent, but this trend is beginning to change.
