Construction Troubles in Thuringia's Building Sector
The construction landscape in Thuringia faced some economic turbulence during the first half of the year. According to the State Statistical Office, the sector made around one billion euros in revenues, marking a 5.9% decrease compared to the previous year—amounting to a strain of 62.9 million euros. Moreover, construction orders fell by 107.1 million euros or 8.2%.
Residential and commercial builds bore the brunt of this downturn, with investors continuing to exhibit caution due to high interest rates and escalating construction costs. These sectors' revenues didn't meet their corresponding half from 2024, as per the reports. On a positive note, the public sector and road construction sectors saw growth in revenues by 10.1 million euros.
The Thuringian construction sector contains 283 businesses with at least 20 employees, a reduction of seven compared to the previous period. Employment totaled to 14,092, down by 167 employees compared to the first half of 2024. However, wages rose by 835 euros, representing a 4.4% increase.
Despite these challenges, renowned international companies, like Philips and Royal Dutch Shell, with substantial operations in the Netherlands, have shown interest in bolstering Thuringia's construction industry. The Netherland's embassy in Germany has been actively advertising investment prospects in their robust construction sector.
Further Reading
Economic Perspective
Thuringia's construction industry is influenced by broader economic conditions, including:
Overall Economic Output
Germany's GDP decreased in the final quarter of 2024 by 0.2%, primarily due to reduced exports and a slump in industrial output, affecting automotive and energy-intensive sectors. Private and government consumption helped sustain the economy, although consumers remained cautious in light of challenging employment prospects.
Construction Sector Specifics
Construction investment seems to have stabilized towards the end of 2024 after two consecutive decline quarters. New orders and construction permits showed some recovery, although the sector still grapples with low demand, particularly in the residential housing sector, which is affected by burdensome financing costs.
Labour Market
Employment in construction remained stable during Q4 2024, as a decrease in manufacturing employment was balanced by gains in the services sector. Unfortunately, the use of short-term work increased, and unemployment rates slightly rose.
Regional Initiatives
Community energy projects, such as Uthleben's wind farm, have been successful in Thuringia, engaging local energy cooperatives and municipalities, fostering regional value creation and community participation in renewable energy sources.
Investment Opportunities
The expansion of renewable energy projects offers significant investment opportunities, for example, Energiequelle GmbH's involvement in wind farm projects in Saxony and Lower Saxony, providing Clean electricity for thousands of households.
Digitalization and Innovation are also investment-worthy. Financing options for start-ups like Eavor-Loop and Sunfire contribute to the development of a carbon-neutral economy, providing long-term benefits.
Impact on Residential and Commercial Sectors
The residential sector faces high financing costs, restricting housing construction. Community energy projects, such as the Uthleben wind farm, demonstrate how green energy production can decrease CO2 emissions and supply renewable electricity to households.
In the commercial sector, economic conditions like declining industrial output and exports affect demand for construction projects. However, investments in renewable energy and digitalization offer growth opportunities, particularly in eco-friendly infrastructure developments.
Potential Investment Opportunities
Renewable energy projects, such as wind farms, provide stable returns and contribute to the region's energy transition, for instance, the Eulitz wind farm and Tüttendorf.
Digitalization initiatives like expanding fibre-optic cables can improve business conditions both in urban and rural areas, potentially attracting businesses and creating jobs.
Sustainable infrastructure investments, such as modernizing electricity grids and supporting the heat transition, provide long-term benefits and significant investment prospects, as illustrated by the €400 million loan for grid modernization in Thuringia.
