Improving circumstances in the construction sector
Stuttgart's construction sector is experiencing an increase in order intake, according to recent data from the State Statistical Office. The increase can be attributed to several key factors, including a growing demand for affordable living space and sustainable construction, and the adoption of wood as a preferred construction material.
Causes
The use of wood as a construction material, particularly for serial and prefabricated construction, is driving demand due to its sustainability and efficiency benefits. Additionally, industry experts emphasize the need for normalization of interest rates and inflation, softening regulations on residential construction, reliable supply chains, and normalization of material prices for the market to pick up further. The lack of skilled workers in construction also accelerates a shift toward automation and serial construction methods, increasing order volumes for construction technologies and prefabricated components.
Current Status
Although there is wide macroeconomic uncertainty affecting order intake guidance, companies like Dürr Group expect around 10% mid- to long-term growth in industries connected to construction such as wooden construction. Large-scale projects, including geothermal energy drilling in neighboring sites near Munich (close to Stuttgart), represent significant order book value increases for companies like Daldrup & Söhne AG, signaling substantial infrastructure activity in the broader region. Despite some setbacks in related sectors, the energy and renewable sectors linked to construction show robust order intake, with orders for wind turbines and renewable project expansions growing strongly in Germany.
Future Expectations
The construction industry in Stuttgart is expected to benefit from a continued push towards sustainable, serial, and automated building methods, especially utilizing wood. Market growth will depend on stabilization of economic factors and regulatory adjustments that ease residential and serial construction. Energy-related construction projects like geothermal and wind are expected to add momentum, creating a positive outlook for construction-related order inflows across the region, including Stuttgart.
However, Thomas Moeller, CEO of the Baden-Württemberg Construction Industry Association, suggests that the government must quickly counter the fragile economic situation with improvements in the framework conditions for residential construction and increased infrastructure investments. The construction industry association expects economic stimulus in the second half of the year from the federal government's infrastructure fund in road construction and other civil engineering.
Despite the increase, Moeller notes that building permits will continue to remain at a low level, and no solid trend reversal has been achieved in the construction industry. Although the overall outlook for the construction industry is currently more favorable than it was last year, Moeller states that there is no solid upswing in the construction industry as of April. The additional funds from the infrastructure fund are only expected to translate into concrete orders by the second half of the year, according to association experts.
- To maintain the current growth trend in Stuttgart's construction sector, it's crucial for the government to normalize interest rates and inflation, soften regulations on residential construction, establish reliable supply chains, and standardize material prices, as highlighted by industry experts.
- Supporting the overall growth of the construction industry, the government's anticipated infrastructure investments from the second half of the year, particularly in road construction and other civil engineering, are expected to boost order inflows, leading to a more significant jump in construction-related activities, including Stuttgart's economy and social policy, finance, and business sectors.
