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German construction industry is divided

Chart of the week
Alternatives
Macro
Industry

19/09/2025

Although Germany’s residential construction is weak, other construction sectors, such as civil engineering and specialized construction remain robust

Crane Lowering Girders to Two Builders
German construction industry is divided

The German construction industry is divided. While the residential construction sector is under pressure, other areas of construction are performing much more robustly. The reasons for this divergence are manifold, but they also highlight the structural challenges and opportunities facing the industry. Our Chart of the Week illustrates the difference between Germany’s building and civil engineering construction. Residential construction is categorised as building construction, while roads, railways, and bridges are categorised as civil engineering.[1]

Germany’s residential construction is suffering from high interest rates, high construction costs and increasing regulatory uncertainty. However, while residential construction is stagnating, other segments of the construction industry are showing upward trends. Civil engineering is benefiting from the expansion of the rail network, power lines and digital infrastructure. Construction, such as tunnel, bridge and plant construction, is also recording stable to rising order intake. While infrastructure investment is developing comparatively steadily, investment in residential construction is declining significantly.

A decisive impetus is coming from the German government: its new infrastructure package provides for investments of up to €500 billion over the next twelve years. More than €100 billion is set to be spent by 2025, providing a significant boost to public construction, among other things. The federal states and the Climate and Transformation Fund are also involved.[2]

“Construction is more than just residential construction,” says Martin Moryson, Global Head of Economics at DWS, when describing the situation. “Public and commercial construction, in particular, are benefiting from long-term infrastructure measures.”

However, this positive development is not without its challenges. The shortage of skilled workers remains a key problem. Many companies are finding it difficult to recruit qualified personnel at short notice. In the long term, however, rising wages should make the sector more attractive to workers again. This is a classic labour shortage mechanism, which should lead to higher employment in the medium term – provided the framework conditions are right.

The federal government's infrastructure plans are intended to boost the German economy. Developments in civil engineering already show what is possible when political impetus and social demand come together. And even residential construction could pick up again. After all, there is a shortage of housing following the decline in residential construction activity. However, all this depends on successfully alleviating the bottlenecks in the labor market. Because only with enough skilled workers can the planned construction projects be realized.

The German construction industry is showing a mixed picture.

* moving average
Sources: Haver Analytics, DWS Investment GmbH as of 9/17/25

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as of 9/19/25; RBA0037 082244_215