Summary

The market for Commercial Construction in Germany is estimated to be valued at more than USD XX billion and is estimated to grow at a CAGR of more than 4.5% during the forecast period.

Germany is one of the Europe’s leading construction market and home to the largest stock of buildings let it be residential skyscrapers, industrial built environment, or commercial construction. A number of direct and indirect drivers are responsible for boom in the construction industry and investment portfolio, which keeping in mind the short term disruption caused by the pandemic, COVID-19, are going to continue delivering progress for the sector in the foreseeable future. Some of these are the population growth, demographic changes, and a favourable economic development. Some of the niches like prefabricated buildings, green building technologies, green construction related building materials and components, are thriving in the industry trying to meet the 2030 Sustainable Development Goals, primarily the climate protection targets.

Turnover in building construction increased by 8.2% in Q1, 2020 as compared to the Q1, 2019, as reported by Federal Statistics Office, Destatis. This is supported by a 8.3% increase in turnover of Electrical, plumbing and other construction activities (WZO8-432), 8.7% in electrical installation (WZ08-4321), 8.0% in plumbing, heat and air conditioning installation (WZ08-4322), 9.5% in other construction installation (WZ08-4329), 6.9% in insulation works (WZ08-43291), 8.0% in building completion and finishing (WZ08-433), 7.5% in joinery installation (WZ09-4332), 8.0% in floor and wall covering (WZ08-4333), 8.8% in painting and glazing (WZ08-4334). Moreover, number of persons employed by building construction industry also increased by 1.2% in the same period. Further, new orders floated in the construction industry increased by 2.7% in April 2020 as compared to March 2020, showing damping effect of COVID-19 on the industry, after a 10.5% fall in the orders in March compared to February. Further, in building construction and civil and underground engineering, in establishments of enterprises with 20 or more persons, new orders decreased by 2.3% in nominal terms compared with the corresponding month of the previous year. It could be deduced from the above stats that effect of COVID is pertinent but reducing post Feb 2020. In 2018, construction sector saw 4.7 billion EUR of total investments, out of which 20.3% were directed towards construction of residential and non-residential buildings besides 20.4% in construction of roads and railways, 16.8% in Electrical, Plumbing and other construction installation activities, 15.0% in other specialized construction activities, 9.8% in construction of utility projects, and 17.7% in other economic branches. Building permits number increased from 12,410in March,2020 to 12686 in April, 2020. The subsequent buildings cost increased from 7.5 Billion Euros to 8.37 Billion Euros.

Volume of Commercial construction has been growing steadily, as per Germany trade and Invest, GTAI, leading to an appreciable 137.48 Billion USD figure in 2019 from a relatively nominal figure, of 95.68 Billion USD in 2010, keeping in mind the developed economy and a load more amount of initiatives required form the Government in order to boost the revenue from any sector. It is further forecasted to reach a figure of around 150 Billion USD by the end of 2021. A key reason for the forecast is the increasing intention of the industry to increase the efficiency by including innovative technologies like BIM into place, which would help in attaining the targets with relatively more certainty.

Key Market Trends

Digitization of the Germany Commercial construction industry, a key trend: Building Information Modelling

Tracking systems for construction machinery, digital construction files, drones flying above a building site to monitor and control the construction status without human intervention, all are in the latest trend and set to digitize commercial construction industry and more so the entire construction industry of Germany. Digital asset models developed during the design phase become physical assets during construction, serving as the basis for the operation and maintenance. The Federal Ministry of Transport and Digital Infrastructure (BMVI), has set a “Road Map for Digital Design and Construction”, with the intention of development and implementation of the BIM, for all the infrastructure projects, planned for 2020 and henceforth, by the Federal Government, though the primary aim is to clearly mention the legislative and technical know how to develop standards for the usage of BIM. This is being done as part of the German initiative to optimally maximize the usage of technology in the traditional construction industry for the integrated planning processes, efficient and more sustainable use of the resources in buildings, and the immediate transfer of information between the entire group of stakeholders in the planning, design and construction execution process, including project manager, process manager, architects, engineers, construction companies, scientists, and investors/sponsors. Currently, a large share of the construction organizations across the country have not utilized the modelling platform at all, as per a recognized survey by the Govt. in Germany and have been trying to gather more information through various BIM clusters/groups.

Furthermore, innovation gatherings, events, competitions and skill development initiatives in the regard are predominant across the country, along with open invitation to the foreign competitors and research fraternity in order to improve the process of turning integrated digital planning and construction from a vision of the future into well-known standard in construction. 2015-17 was the preparatory phase in the digital regime, followed by extended pilot phase from 2017-20. As of now, 2020 is set to be the BIM performance level 1 for the new projects. Although, benefits of digitization are undisputed, but, small and medium enterprises, forming the engine of the industry, are facing a phase of confusion, in coping up capabilities with the changing digital environment. Hence, it sets an open and ever charming opportunity for the investors whether domestic or international in order to set a strong grip in the commercial construction domain by being a pioneer in the technology upgradation in terms of digitization if the industry.

In the recent future, data, and information, is anticipated to come to the fore, instead of software and applications, and need to focus on improvement in the functional performance of the assets arises, post-Performance level 1. It is worth mentioning that in an increasingly data driven and digitalized built environment, this potential is yet unexploited and entails ample opportunities.

Alleviating energy efficiency, a prime focus in the Germany Commercial Construction Market

As corona restrictions are gradually relaxed and businesses begin to normalize operations, Germany is working on getting its economy back on track with a focus on green growth. The Government incentives and building codes in Germany promote the opportunities abound for heat pump manufacturers (air, ground, and water-source), solar-thermal, and district heating solution providers in commercial building construction. With two thirds of the heating systems in Germany considered inefficient, upgrading old systems is a growing priority. The question of how to tackle climate change was one of the most prominent topics before the crisis. Now many public voices are calling for the efforts to enhance economic recovery to be combined with climate protection and sustainability measures. The green transformation certainly has support at the highest political level. Recent stress upon combining economic recovery with climate protection, at the Petersburg Climate Dialogue (PCD), by Chancellor Angela Merkel and announcement that Germany will push to expand renewables and make investments to help manage structural changes caused by the coal phase-out clearly show the Government initiative.

It is worth mentioning that the further expansion of renewables requires a significant transformation – in particular, the integration of renewables in the grid and the electrification of other sectors such as heating and transport. This transformation is a challenge, but also an opportunity for new business models, innovative technologies, and international cooperation – from smart grid solutions, innovative charging infrastructure, electric vehicles, and demand-side response technologies. Green growth packages might foster growth in these areas - also creating opportunities for international businesses to enter the German market. Germany’s BDI industry association has singled out digitization and energy efficiency measures as industry investments for stimulating growth. In a supporting legislative, Germany’s new Building Energy Act (Gebäudeenergiegesetz or GEG) has cleared an important hurdle in the legislative process. The Building Energy Act brings together in one law the various regulations for building energy efficiency and the use of heat from renewable sources, namely the Energy Saving Act (EnEG), the Energy Saving Ordinance (EnEV) and the Renewable Energy Heat Act (EEWärmeG). It also implements the European Union’s energy performance of buildings directive (EPBD) and defines the nZEB near-zero energy building standard, or Niedrigstenergiegebäudestandard. The current requirements for energy efficiency in new and existing buildings have largely been carried forward from existing legislation. There will however be more ways to comply with the requirements and new technologies have been included. Another innovation is that electricity generated with solar PV on or near a new residential building can be used to meet the minimum renewable energy requirements for heating and cooling, which is not currently possible under EEWärmeG.

Further to add in the set of initiatives by government promoting green commercial construction, the federal law on cogeneration (KWKG) has been changed and heat from treated sewage is now recognized in the same way as ambient heat from environmental sources such as water or the air. The system in question is based on a modern gas turbine power station and a large-scale heat pump. It will be built at Hamburg’s Dradenau sewage treatment plant and will form part of the Harbour Energy Park. Under the modified legislation, it will be considered an innovative CHP system and thus be eligible for funding. It is set to become the first large-scale sewage heat pump system in the country.

Competitive Landscape

The Germany Commercial construction market is highly competitive, despite the major local and international players having created enough competitive environment in the sector. Still, the market opens opportunities for small and medium players due to increasing govt investments in the sector. The Germany commercial construction market presents opportunities for growth during the forecast period, which is expected to further drive market competition. With large players competing with others for a significant share leaves the Germany construction market with no observable levels of consolidation.

A few key players in the market include Leonhard Weiss GmbH, Koster GmbH, Klbl GmbH, BAM Deutschland, AUG. PRIEN Bauunternehmung (GmbH & Co. KG) and Strabag AG.

The Government regulations make it quite easy for any player, local, national, or multinational to enter the market with ease and create its own share.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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