Industry eying potential benefits from designated resources within construction sector
In Baden-Württemberg, the construction sector is experiencing a cautiously optimistic phase, with signs of improvement in the broader German market. According to the Association of the Construction Industry Baden-Württemberg, the German Construction PMI for July 2025 rose to 46.3, indicating the slowest contraction since February 2023.
Although the overall market remains subdued, some subsectors are beginning to recover. Civil engineering and commercial construction have shown growth, while the housing sector still faces significant challenges with contracting activity.
Key factors contributing to the construction uptrend in Baden-Württemberg include stabilized interest rates, steady inflation, ongoing infrastructure projects, and positive industry investments. Building interest rates in Germany have moderated to around 3.57% for 10-year fixed-rate loans and 3.7% for 15 years. The annual inflation rate in Baden-Württemperg is 2.3%, providing a stable environment for construction.
Large-scale projects, such as the SuedLink3 construction initiated in Baden-Württemberg in September 2024, are advancing, indicating investment and government support for infrastructure. Companies like HENSOLDT in Ulm are expanding production capacity and recruiting staff, reflecting broader industrial development that may parallel construction sector growth.
Thomas Moeller, Managing Director of the Construction Industry Baden-Württemberg, is hopeful for a billion-dollar special fund for infrastructure from the federal government. He also emphasizes the need for public clients not to neglect the situation in terms of personnel, as the public construction administration must be both digitalized and increased in terms of personnel.
Moeller also insists on reducing the real estate transfer tax and limiting the new construction subsidy to the energy-efficient standard EH55 to provide quick relief in residential construction. He urges for quick determination of how the funds will be distributed, so that the state and municipalities can plan the financing and tender new construction projects.
Despite the positive signs, the construction industry in Baden-Württemberg continues to face challenges. The upswing that was noticeable in the order inflows in residential construction in January has come to a standstill. Turnover in both residential and commercial construction decreased in February compared to the previous month, with Stuttgart seeing a 11.6% and 11.9% decrease in residential and commercial construction turnover, respectively.
Numerous roads, bridges, and rails are urgently in need of renovation, according to Moeller. He also highlighted the need for addressing the complexity and high cost of the previously applicable stricter EH40 standard.
For more information, contact Wolfgang Leja at 0711 66601-131 or w.leja@our website.
[1] Source: IHS Markit [2] Source: Deutsche Bundesbank [3] Source: HENSOLDT AG [4] Source: SuedLink3 project website [5] Source: Statistisches Landesamt Baden-Württemberg
