Sunday, 1 February 2026
The German construction industry continues to face significant challenges, with the impact of the federal government’s special investment fund yet to translate into tangible relief for the sector. Between January and October 2025, 3,174 insolvencies were recorded in construction, representing an increase of 9.3% compared with the same period a year earlier, according to data cited by Atradius.
Frank Liebold, Country Manager Germany at Atradius, said that sentiment across the sector has deteriorated, although he noted that conditions could stabilise and improve slightly in the course of 2026. He pointed to continued pressure from rising material costs, a persistent shortage of skilled labour, and lengthy approval and permitting procedures, all of which are contributing to payment delays and higher insolvency risks.
After a relatively stable period in 2020 and 2021, the construction industry has experienced growing financial stress. Atradius reports that non-payment notifications have nearly doubled over the past five years, reflecting tighter liquidity and weaker payment discipline among market participants.
Residential construction continues to be the most challenging part of the market. Government targets of 400,000 new homes per year have been missed consistently, with an estimated 220,000 units completed in 2025. Industry estimates suggest that Germany will require around 800,000 additional homes by 2027–2028.
At the same time, the German Construction Industry Association reported that 215,500 residential and non-residential units were approved between January and November 2025, an increase of 11.3% year on year. While this points to some improvement in forward indicators, industry leaders remain cautious. Peter Hübner, CEO of Strabag, described 2025 as a lost year for the sector.
Commercial real estate construction also remains subdued. Demand for office space has declined since the pandemic, reflecting structural changes in working patterns, including the sustained use of remote and hybrid work models.
The financial scope created by the government’s special fund is expected to affect the construction sector only gradually. So far, this has not been reflected in order books or business surveys, partly because existing backlogs must be worked through before new projects can start.
According to forecasts from Oxford Economics, total construction output in Germany is expected to increase by around 1.4% in 2026, with stronger growth anticipated in subsequent years. Residential construction, which contracted by an estimated 4.3% in 2025, is forecast to return to modest growth of around 1.1% this year. The rise in building permits and the effects of monetary easing suggest that investment activity may have reached a low point.
Oxford Economics also expects non-residential construction to grow by 2.4% in 2026, while civil engineering output is projected to increase by 1.2%. In the longer term, civil engineering is likely to benefit most from public investment, particularly given Germany’s infrastructure needs. Estimates indicate that around 4,000 bridges require renovation in the short to medium term.
Despite these more positive medium-term expectations, Atradius warns that structural obstacles continue to limit the sector’s capacity to respond. The shortage of skilled workers remains a key constraint, raising concerns about whether planned housing and infrastructure projects can be delivered at the required pace.
Bureaucratic requirements also continue to slow project delivery. Civil engineering projects typically require between 15 and 25 permits and technical approvals before construction can begin, while road projects may need more than 30 permits and expert assessments.
According to Atradius, addressing labour shortages and streamlining approval processes will be critical if the construction industry is to benefit fully from public investment programmes and achieve a more sustainable recovery.
Source: Atradius
