Across Europe, discussions within construction offices, supply chain teams, and design studios are shifting in focus. Instead of concentrating solely on short-term business performance, industry professionals are paying closer attention to the long-term forces that will define construction in 2026 and the years ahead. Persistent challenges, emerging opportunities, and strategic decisions are shaping how the sector prepares for the future.
The year 2024 ended with weakened confidence, influenced by workforce shortages, high material prices, cautious investment, inflation, and unstable energy costs. These pressures were compounded by reduced demand and delayed projects. However, despite these negative indicators, deeper analysis reveals valuable insights and signals of adaptation within the industry.
1. Market Overview
The construction industry didn’t just slow down in 2024 — it experienced an overall decline. This downturn affected most major European markets, although the severity varied. Germany recorded a contraction of -4.5%, France -4.4%, and Poland -4.3%. Meanwhile, a few countries showed limited growth, including Italy at 0.2%, the United Kingdom at 1.2%, and Spain at 2.5%.
Several structural factors contributed to this situation, including elevated interest rates, costly materials, labor shortages, and geopolitical uncertainty. New construction projects were hit hardest, while renovation activity remained more stable due to energy-efficiency initiatives and regulatory programs.
Signs of Recovery in 2025
Forecasts for 2025 suggest moderate improvement, although not a full recovery. Spain is expected to grow by 4%, Italy by 2%, and the UK by 1%, while Germany, France, and Poland may continue facing declines.
This gradual improvement is being driven by:
- Lower interest rates encouraging new projects.
- Increased renovation activity.
- Greater focus on sustainability upgrades.
- Reduced material and construction costs.
- Anticipated increases in government investment.
Overall, the outlook points to stabilization rather than rapid expansion.
2. Labor Shortages: A Long-Term Structural Issue
Workforce shortages continue to represent one of the biggest challenges for the construction industry. Companies are no longer viewing this problem as temporary but as an ongoing limitation that directly affects project timelines and costs.
Data highlights the scale of the issue:
- In Germany, 89% of painters and 76% of installers report labor shortages.
- In the Netherlands, 69% of architects and 67% of contractors face similar challenges.
- In Italy, 47% of painters and 37% of installers are affected.
Demographics play a major role in this situation. Only a small portion of workers are under 42, while a large percentage belong to older generations approaching retirement.
This shortage leads to several consequences:
- Rising labor costs.
- Delays in project completion.
- Reduced productivity due to skill gaps.
- Limited capacity for innovation and training.
To address these issues, companies are increasingly investing in automation, robotics, artificial intelligence, and prefabrication methods. Training programs are also being introduced to attract and prepare new workers.
3. Prefabrication Continues to Gain Relevance
Although the use of prefabrication slowed slightly due to fewer new construction permits, interest in this approach remains strong. More architects and contractors are gradually adopting prefab solutions, recognizing their long-term advantages.
Prefabrication offers several important benefits:
- Faster project completion.
- Reduced dependence on onsite labor.
- Improved cost control.
- Greater efficiency.
Countries such as the Netherlands, Belgium, and Spain are leading in prefab adoption, while France and the UK are progressing more slowly.
One of the most significant advantages is sustainability. Prefabrication can reduce material waste by up to 90% compared to traditional construction. Additionally, wood-based prefab systems are becoming more popular due to their environmental benefits.
4. BIM and Digital Tools: Adoption Slows but Potential Remains High
Building Information Modeling (BIM) has been promoted as a solution to improve coordination and efficiency in construction projects. While many architects use BIM regularly, adoption among contractors and installers remains limited.
Larger companies are far more likely to use BIM compared to smaller firms, which often lack the resources and training required for implementation.
Despite this uneven adoption, BIM delivers clear advantages when used correctly:
- Improved project coordination.
- Reduced errors.
- Better cost management.
- Enhanced planning capabilities.
However, most companies only use basic features, such as creating drawings or visual models. Advanced capabilities like cost simulation, scheduling, and sustainability analysis are still underutilized.
The main barriers are not technological, but organizational, including lack of training and resistance to change.
5. Sustainability Remains a Key Priority
Sustainability has become a central focus in the construction sector, although implementation does not always match expectations. Many companies include sustainability goals in their plans, but limited budgets often prevent full execution.
Some countries, such as the Netherlands, the UK, Germany, and Spain, show strong commitment to sustainable construction. However, other markets still lag behind.
One of the most important areas of progress is material selection. More environmentally friendly materials are becoming common, including:
- Bio-based insulation.
- Recycled materials.
In the coming years, wood construction and natural insulation are expected to increase significantly, while high-carbon materials will gradually decline.
Innovative concepts like urban mining and material tracking systems are gaining attention, although their practical use remains limited for now.
The construction industry is entering a period of adjustment rather than rapid growth. Persistent labor shortages, gradual digital adoption, and increasing sustainability requirements are reshaping how projects are planned and executed.
To remain competitive, companies must embrace new technologies, invest in workforce development, and adopt more efficient construction methods such as prefabrication. At the same time, sustainability will continue to influence material choices and regulatory standards.
Ultimately, success in the coming years will depend on strategic planning, technological integration, and the ability to adapt to evolving market conditions. Businesses that proactively respond to these trends will be better positioned to achieve long-term stability and growth in an increasingly complex construction environment.
