Paul Thomen

Thursday, 3 October 2013

Construction in Germany – Key Trends and Opportunities to 2017

The report “Construction in Germany – Key Trends and Opportunities to 2017” by Timetric is now available at Contact with report name in subject line and your contact details to purchase this report or get your questions answered.

The German construction industry registered a CAGR of 3.00% during the review period (2008−2012). Growth was fuelled by a rise in disposable income and stable employment. Salaries in Germany increased by 9.1% between 2008 and 2012, while the unemployment rate stood at 5.3% in 2012. This demand factor contributed to a steady increase in construction activity during the review period. Growth was also supported by investments in the country’s export-oriented industrial sector, which accounted for 26.1% of the country’s GDP in 2012. The industry is anticipated to post a forecast-period (2013−2017) CAGR of 2.22%, with future growth mainly driven by expansion in the residential construction market.

This report provides a comprehensive analysis of the construction industry in Germany:
- Historical (2008-2012) and forecast (2013-2017) valuations of the construction market in Germany using the construction output and value-add methods
- Segmentation by sector (commercial, industrial, infrastructure, institutional and residential) and by project type
- Breakdown of values within each project type, by type of activity (new construction, repair and maintenance, refurbishment and demolition) and by type of cost (materials, equipment and services)
- Analysis of key construction industry issues, including regulation, cost management, funding and pricing
- Assessment of the competitive environment using Porter’s Five Forces analysis
- Detailed profiles of the leading construction companies in Germany

Germany’s GDP growth decreased from 3% in 2011 to 0.7% in 2012 owing to subdued external demand and weak investment.

According to Timetric projections, Germany’s real GDP is likely to expand by 0.4% in 2013 and 1.5% in 2014, supported by a rise in private consumption. However, persistent weak economic activity in the eurozone will continue to affect investment and exports.

The German construction industry recorded a decline in 2012 after recovering from the financial crisis and registering respective growth rates of 4.7% and 7.9% in 2010 and 2011. Industry value declined by 0.3%, while growth in construction value add contracted from 5.6% in 2011 to 1.4% in 2012, as the eurozone crisis worsened and Germany experienced its impact with a contraction in investments.

Prospects for the German construction industry are likely to be hampered by a shortage in workforce being recorded, with the situation expected to worsen over the years. Owing to a decline in fertility rates, the working-age population (aged between 20 and 65 years) is anticipated to decline from 49.6 million in 2008 to 42.1 million in 2030 and 32.6 million by 2060. The government plans to increase the retirement age from 65 to 67 years by 2029. Efforts to boost immigration and ease restrictions on labor mobility within the EU are considered another potential solution to the problem.

Germany is the world’s largest exporter of machinery and equipment (M&E) with 16.1% of total world exports valuing EUR931 billion in 2012. The M&E sector is also Germany’s largest sector with a turnover of EUR209 billion in 2012 and providing employment to over one million people. The sector received foreign investment in around 475 projects between 2003 and 2012. Around 75% of products are exported and prospects for the sector are upbeat. There is large demand for these products from major markets such as the US, which is on the course of steady recovery, and the BRIC (Brazil, Russia, India and China) countries, which are experiencing slowing yet stable demand.

Residential construction is a key market in the German construction industry, accounting for nearly 50% the total construction output. Any changes in the market will affect the overall growth of the industry. The market is expected to be a major driver of future growth as demand for residential construction is expected to be robust owing to a rise in immigration, low interest rates and a rise in disposable income.

Germany is expected to record significant increase in healthcare investments, as the proportion of elderly people (age above 65 years) is expected to increase to 34% of the total of the total population by 2060. The increase in the aging population will necessitate the need for increased allocation in specialized aged-care centres. The potential investments are likely to drive the expansion of institutional construction over the forecast period.

According to the World Economic Forum’s Global Competitiveness Report 2012–2013, Germany is ranked third in terms of the quality of its infrastructure as the country boasts highly developed facilities in all modes of transport. Given the solid fundamentals of the country, it is expected to invest in maintaining its position at the current level.

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