Study: Building Construction Remains Under Pressure, Civil Engineering Continues to Grow
16.07.2026
Figure: EY-Parthenon (Adobe Stock)
According to estimates by the strategy and transaction advisory firm EY-Parthenon, the German building construction sector will not see a sustained recovery in 2026. While high construction costs, rising interest rates, and geopolitical uncertainties continue to weigh on demand, the infrastructure and civil engineering sectors are performing significantly more robustly thanks to high levels of public investment. These findings are detailed in the latest study by EY-Parthenon.
Following a 3.6% decline in construction activity in 2024 and a further 1.9% decline in 2025, EY-Parthenon expects a 0.2% decline in 2026. Real growth of 0.8% is not anticipated until 2027, and this could rise to 1.2% in 2028. According to the study’s authors, this suggests that stabilization—rather than a significant upswing—is to be expected for the time being.
Infrastructure Construction Remains a Growth Driver
Infrastructure construction is showing a significantly more positive trend. Driven by public investment, this segment is currently growing at a real rate of around 4% per year. “Given the infrastructure programs and the high need for modernization, particularly in the areas of transportation, water, and energy, we expect steady market growth of about 4 percent annually in real terms for infrastructure construction in the coming years as well,” says Volkmar Schott, a partner at EY-Parthenon.
Although the market volume of infrastructure construction accounts for only about a quarter of that of building construction, the growth in infrastructure construction could largely offset the declines in building construction in 2026.
Residential Construction and Renovations on the Decline
New residential construction remains particularly affected. According to EY-Parthenon, both the private single-family home segment and commercial multi-family residential construction declined by 6.9% each in 2025.
“While the demand for housing remains high, the currently high construction costs, interest rates, and uncertainties have led to a backlog in demand. A reduction in regulatory requirements and more consistent cost management could revive demand,” explains Björn Reineke, partner at EY-Parthenon.
New non-residential construction also declined. Commercial construction fell by 1%, and public building construction by 0.6%. In addition, modernization measures also declined in 2025, particularly in the area of energy-efficient retrofits.
Special Fund Primarily Strengthens Infrastructure
According to EY-Parthenon’s assessment, the special fund for infrastructure and climate neutrality is likely to support the development of infrastructure construction significantly more than that of building construction. The investment program totals approximately €500 billion. As things stand, more than 70% of the volume is allocated to construction projects, of which about 55% is for infrastructure projects and 18% for building construction.
EY-Parthenon expects a gradual stabilization in building construction through 2028.
The study identifies more efficient cost structures, a reduction in regulatory requirements, and faster approval processes as key prerequisites for a revival in demand.
CONTACT
EY-Parthenon
Völklinger Straße 2
40219 Düsseldorf / Germany
+49 211 9352 0
