Building on success

After touching a post-reunification nadir in 2005, Germany’s construction industry has recovered to see solid growth in recent years. Current developments, such as a record influx of refugees needing housing and broad infrastructure investment, are set to underpin the sector further. However, the country’s construction companies also face an array of challenges and will need flexible business strategies to continue on a growth trajectory. Partnering with the Munich-based HypoVereinsbank, we took an in-depth look at the trends driving the German construction sector and its potential over the rest of the decade.

Weighing in at 294 billion euros, the German market is Europe’s largest by volume. Yet it ranks only fifth in terms of growth in the European Union over the past five years, and we expect the German building trade to book real annual growth of 1.5% through 2020. Though that might seem small compared to other booming areas of the economy, Germany’s once-beleaguered construction sector could not always take growth for granted in the past. Still, German firms have attained admirable stability and their insolvency rate has reached a historic low.

Supporting the sector’s fundamentals will be the construction of apartments both to house refugees and satisfy increasing demand in urban centers. The German government hopes to encourage the building of at least 350,000 new apartments with a combination of financial enticements and by cutting bureaucratic hurdles. Yet another driving factor will be investments in infrastructure, as the Transport Ministry plans to spend 265 billion euros primarily on roads and railways by 2030.

Growing domestically and internationally

Though digitalization efforts—networking machinery and building information modeling—could help boost the industry’s lagging productivity, construction firms that ignore this important trend stand to put their long-term competitiveness in jeopardy. Germany’s ageing society also poses both challenges and opportunities for the sector.

Though some construction companies are already struggling to find skilled employees, others will benefit from renovations and new facilities for the elderly. The German construction industry will need to adopt business strategies tailored to company-specific needs. Whether growing domestically and internationally, or focusing their portfolios on growth fields, only proactive firms will be prepared to profit from ongoing positive developments in the sector.

• Photos: Juan Carlos Martin (revirao), Getty Images; Grassetto, iStockphoto