After years of consistent growth, Europe’s construction sector is now experiencing a significant slowdown, raising important questions about its future. In this article, I will highlight three key trends currently shaping the sector and likely to influence its trajectory through 2025 and beyond. Read on to discover what these trends mean for the future of construction in Europe and your business.
The slowdown in Europe’s construction sector can be attributed to several interconnected factors. The initial imbalance between supply and demand during the COVID-19 lockdowns led to rising prices. Still, the situation has been further aggravated by the central banks’ interest rate hikes and sanctions on Russia and Belarus following the Ukraine war. These sanctions have restricted access to critical utilities and materials. Additionally, new regulations like France’s RE2020, aimed at promoting environmentally sustainable building, add transformative yet disruptive pressures. Given the significant impact of these factors on the industry, it’s essential to examine them closely before diving into the overview of trends.
Europe’s construction market: the big picture
Europe’s construction sector has faced two significant disruptions since 2020. First, during COVID-19, many sites were forced to pause due to lockdowns and labor shortages, delaying contractors’ demand for construction materials. The supply side was similarly affected, as material producers, logistics companies, and distributors could not fulfill orders from the limited number of ongoing projects, leading to significant shortages. This unusual supply-demand imbalance caused price hikes, especially as the scale of disruption varied across regions and different phases of the COVID-19 timeline. Additionally, the rise of telework prompted investors to reconsider their office and hotel construction plans.
As COVID-19 restrictions were lifted, a second factor came into play: sanctions on Russia and Belarus. These sanctions primarily impacted the construction sector by reducing the supply of crucial manufacturing inputs, which can be grouped into two categories. First, utilities: soaring energy costs, particularly for natural gas, essential for producing materials like cement and insulation, have significantly increased material costs. Second, raw materials, such as timber, including processed wood like OSB and plywood, have become scarce, affecting traditional and innovative wood-based construction methods. This scarcity is especially problematic given the rising demand for sustainable, low-carbon materials, driven by well-intentioned but highly transformative regulations like France’s RE2020 environmental mandate and the growing interest in structural wood, such as Cross-Laminated Timber (CLT) and Laminated Veneer Lumber (LVL).
France’s ambitious RE2020, which mandates sustainable construction practices, inadvertently highlights a geographic imbalance: while France is pushing for greater use of timber in construction, it is not a significant producer and instead relies on imports from forestry-rich nations like the Nordic countries, Germany, and Poland. The mismatch between supply and demand, exacerbated by the post-pandemic landscape and ongoing sanctions, has driven material prices to unprecedented levels, surpassing those seen during COVID-19.
Investors and developers have responded by tightening budgets, reducing project scopes, and turning to more efficient materials and methods. However, rising interest rates have constrained their ability to finance projects, further complicating matters. Public sector projects, supported by post-COVID-19 recovery funds, are somewhat shielded from this situation, but private sector investment has taken a significant hit.
While interest rates may eventually fall, providing the construction sector with much-needed stimulus, remaining challenges will continue to disrupt the construction materials market, creating a domino effect downstream. Against this backdrop, let’s explore three of the key trends shaping the European construction sector now and likely to impact it in the long term.
Key trends shaping the future of construction
In this article, I’ve decided to focus on three selected trends:
- Use of low-carbon materials
- Efficiency gains
- Lighter buildings.
I must underline that they are just part of the larger forces shaping the European construction industry today. They are chosen not only because they represent essential shifts within the sector but also because they are poised to grow significantly as the market adapts to ongoing economic challenges. While interest rates are expected to ease eventually, the impact of sanctions, supply chain disruptions, and regulatory changes will likely persist, creating a more complex and competitive landscape for the European construction industry. Moreover, the strength of these trends will vary across different countries and regions, reflecting the diverse challenges and opportunities within Europe’s fragmented construction market.
Trend No 1: Use of low-CO2 construction materials
Three fundamental forces are driving the demand for low-carbon construction materials:
- Environmental priorities
- Financial incentives
- Regulatory requirements
The construction industry, increasingly aware of its environmental footprint, is turning to materials that help reduce carbon emissions. Financially, eco-friendly buildings often have lower long-term operating costs and can command higher prices from buyers seeking to align with sustainability goals. However, they typically increase budgets during the construction phase, but their long-term benefits are verified through the growing use of Life Cycle Analysis (LCA). This analysis is conducted across all project phases, including previously omitted stages such as concept and design, third-party transportation services, and end-of-life decommissioning. LCA results underscore the urgency of reducing carbon footprints at every stage to achieve or approach the goal of net-zero emissions for the project.
This has spurred demand for timber, mineral or plant-based insulation (using wood fiber and, for example, hemp), highly recyclable gypsum, and even less obvious choices like steel and concrete, provided they are produced in their “green” form.
Legally, frameworks such as France’s RE2020 and the UK’s zero-emission standards for educational buildings are accelerating the shift toward low-carbon materials.
Trend No 2: Efficiency across the construction value chain
With costs rising and financing constrained, stakeholders across the construction value chain seek efficiencies at every turn. Engineers are experimenting with artificial intelligence to optimize structural designs, while developers are reconsidering how to maximize the value of urban spaces through more efficient land use and upward extensions. The growing cost of construction materials, coupled with restricted access to land, is driving the adoption of methods that reduce construction time.
Prefabrication, whether using timber or steel frames or volumetric construction, is gaining traction as it speeds up on-site work, simplifies logistics, and minimizes the burden an active construction site places on the local community. Multifunctional materials, such as fiberglass-reinforced gypsum boards that provide cladding, insulation, and fire protection in one, are also helping to reduce both time and costs.
Though these materials can be more expensive upfront, their ability to streamline the construction process and reduce long-term costs is becoming increasingly attractive to developers.
Property owners are also seeking buildings that will provide operational efficiencies over their lifecycle, pushing for using durable, energy-efficient, and recyclable materials.
Trend No 3: Lighter buildings
The growing focus on sustainability drives increased demand for lighter construction materials and solutions. Both timber and steel frame systems, once primarily confined to specific building types, are now widely adopted due to pressure to reduce buildings’ carbon footprints, construction time, and the overall load transferred to the building structure.
In addition to these frame systems, new construction wood types like Cross-Laminated Timber (CLT) and Laminated Veneer Lumber (LVL) are gaining traction for their excellent structural and environmental benefits. Despite the high CO2 emissions and volatile costs associated with steel, steel frames may also see increased adoption across Europe as the development of green steel gains momentum. Additionally, most materials used in both frame systems are easily recyclable.
However, fire protection requirements remain a significant challenge for wooden buildings, limiting their height and functionality. This is often addressed using mineral wool or wood-fiber insulation (which may require fire certification for the entire wall assembly) and fire-protective cladding. It is also expected that as wood becomes more prevalent in construction, legal requirements for this type of building structure will become more favorable, as wood, in specific scenarios, offers better fire resilience than steel, as it does not melt.
Lighter building materials, especially with AI-supported structural calculations, reduce the need for large concrete foundations, cutting costs, emissions, and construction time. They are also well-suited for upward extensions in dense urban areas, where logistics are challenging and existing structures can support only limited additional load. Finally, these materials are widely used in prefabricated buildings due to their simplified site delivery logistics.
Emerging composite materials, which are lighter and more durable than traditional options, may also see greater adoption in the coming years.
Market conditions for construction players are undoubtedly challenging. That’s why staying informed about the latest trends and industry shifts is more crucial than ever. At EMBS Group, we provide comprehensive market intelligence services that help our clients make data-driven strategic decisions and maintain their competitive edge. If you’re unsure whether your business is prepared for the shift toward sustainable construction or want to explore how key trends could impact your operations, feel free to reach out, and let’s discuss how we can support your goals.
