The German construction industry saw an increase in orders in the first half of the year. From January to June, the volume of orders in the construction sector grew by 1.9 percent in real terms compared to the previous year, according to data released by the Federal Statistical Office on Friday, August 23. The trend was upward, with orders in June rising by 2.7 percent from the previous month and 4.2 percent from the same month last year.
The data reveal varied developments across different sectors. The civil engineering sector, which includes state-dominated infrastructure projects such as road construction, saw an increase of 6.8 percent in new orders during the first half of the year. In contrast, the building construction sector, which is heavily influenced by residential building and private demand, experienced a real decline of 3.1 percent.
“There is still no relief for residential construction,” said René Hagemann, Deputy Managing Director of the Main Association of the German Construction Industry. “The missing building permits are now absent as orders in the construction companies’ books.” Complaints about housing shortages and rising rents are expected to continue and potentially increase.
Revenue and employment decline
Revenue in the construction sector fell by 1.0 percent in the first six months. After adjusting for inflation, the decrease was even more pronounced at 2.3 percent. The number of employees in the construction sector also declined by 0.3 percent during the first half of the year.
Recent sentiment in the construction sector has worsened, as reflected in the monthly business survey conducted by the Ifo Institute. The barometer for July was at minus 26.0 points, indicating a deep negative outlook. “Companies assessed their business situation as somewhat worse,” the Ifo Institute reported. “Expectations remained almost unchanged, marked by significant pessimism.”
Impact of high interest rates
High interest rates, imposed by the European Central Bank (ECB) to combat high inflation, are particularly affecting residential construction. These rates have rendered many projects unprofitable for builders. Although the ECB lowered its key interest rate in June for the first time in years and might make further reductions this year, economists believe that any revival in the construction sector will likely be delayed.
Major construction projects which started in the first half of 2024
In the first half of 2024, Germany saw the commencement of several significant construction projects. One of the most notable is the U5 Hamburg Subway Line Development, which aims to connect Bramfeld-City Nord to Arenen Volkspark via Innenstadt in Hamburg. This project, which began in the first quarter of 2024, is expected to be completed by the end of 2035 and will feature a driverless operation to enhance efficiency and stability.
Another major project is the expansion of Highway A281, specifically the BA4 Weser Tunnel section in Bremen. This 4.9 km tunnel project, also initiated in the first quarter, is designed to improve traffic flow in northwestern Germany and is slated for completion in early 2029. Additionally, the Tide Mixed-Use Building Ensemble in Hamburg began construction, aiming to create a complex that includes residential, commercial, and gastronomy facilities over a 1.5-hectare area, with an expected completion date in mid-2026.
Berlin also saw the start of the Alexanderplatz Covivio High-Rise Tower Development, a mixed-use building project intended to meet the growing demand for office, retail, co-working, and residential spaces, with completion anticipated by late 2026.
Lastly, the construction of a new prison building in Munster-Wolbeck, North Rhine-Westphalia, commenced, aiming to provide modern amenities and meet contemporary standards, with the project expected to be finished by the end of 2026.
