Confidence and permits are soaring
So, what are the economic drivers of this positive future?
In 2020, new building was put on hold due to COVID-19, but building renovation continued, even if at a slower pace, as people spent more time at home and had the money to invest in retrofits.
“In 2021 there has been a strong comeback in terms of new non-residential which suffered in 2020. Now there is a change in commercial behaviour that is focused more on distribution centres and warehousing, while hospitality and leisure will see new vitality.”
As a result, the number of permits for new non-residential buildings has skyrocketed. Double digit growth is now anticipated across the countries surveyed by Euroconstruct with these investments expected to materialise between 2022 and 2024.
In addition, confidence in the market is back to pre-pandemic levels and the expected rise in interest rates started but slower than anticipated. This means money is still available at favourable rates and investors feel comfortable, particularly due to the expected normalisation of supply and demand in 2022.
Renovation of 35 million buildings by 2030
In 2021 there was imbalance of supply and demand in terms of building materials and many manufacturers were taken by surprise. “Now they have geared up their production side and demand has stabilised and we no longer have the strange seasonality we experienced in 2021,” says Davide.
The imbalance of supply and demand will be slowly normalised in 2022 with another positive trend to come. 2021 has shown a strong increase of materials trade but did not see a rebound in the trade of services but this is expected to change in 2022.
The market is also seeing a transition towards more off-site construction with prefabricated building becoming more popular. Additionally, energy efficiency is increasingly important with initiatives such as the European Commission’s ‘Renovation Wave’ — which aims to renovate 35 million buildings — driving the market.
Renovation plans flourished during the pandemic and show no signs of slowing down particularly as recent soaring energy costs have magnified their importance. Now there is a strong backlog of work coming through that will comfortably occupy the industry for the next few years.
“Put all these ingredients in the economic mixer and you have a good outlook for 2022 to 2024,” says Davide.
Challenges of COVID
Construction in some European countries such as Germany, Denmark, Sweden and Poland did not experience major problems during the pandemic, however those that suffered built back in 2021 what they lost in 2020 and even more. Now, most countries expect a positive picture in 2022.
With hindsight it is now possible to see that the economic pandemic misery of 2020 has been very different to the financial crisis of 2009 when construction was contracting more than GDP and driving the downturn.
In 2020, the opposite occurred. Construction was down -4.7% while GDP was suffering at -6.4% meaning that construction helped pull back a V-shaped recovery and produced that impressive 0.73% contribution to growth.