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Pekka Sagner / Michael Voigtländer IW-Report No. 32 5. September 2018 On the relevance and perspectives of commercial construction in the EU

In this paper, we present the current state of European investments in construction. Furthermore we showed how construction investments fared in comparison to overall GFCF, noting that construction investments are still below their peak levels in 2007 for both investments in dwellings and the construction of non-residential buildings and structures.

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On the relevance and perspectives of commercial construction in the EU
Pekka Sagner / Michael Voigtländer IW-Report No. 32 5. September 2018

On the relevance and perspectives of commercial construction in the EU

IW-Report

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German Economic Institute (IW) German Economic Institute (IW)

In this paper, we present the current state of European investments in construction. Furthermore we showed how construction investments fared in comparison to overall GFCF, noting that construction investments are still below their peak levels in 2007 for both investments in dwellings and the construction of non-residential buildings and structures.

During the time period analyzed, investments in the construction of dwellings were more volatile both for the EU as a whole and for most EU member states. The generally assumed strong link between construction investments and overall economic performance took a hit during the economic and financial crisis. In the period before 2007 construction investments and real GDP showed a strong positive correlation for almost all EU member states. This relationship – for many countries and especially for the EU as a whole – did not prevail during crisis years.

The EU faces several challenges regarding construction investments. We focused on challenges for the commercial construction sector. Analyzing the share of office employees in the EU, we found that the share of office employment at total employment increased in all EU member states. Given the lower share of office employment in Eastern and Southern European countries, it is likely that the demand for office space will further increase in the future, making larger investments in non-residential construction necessary. Infrastructure investments in the EU have steadily decreased since 2009. Several entities noted that infrastructure investments were below the needed levels in the past. The resulting investment gap can only be bridged if public as well as private investors, e.g. in form of pension funds, increase their investment activities in infrastructure.

Thus, investments in the construction of commercial buildings as well as infrastructure are necessary for promoting growth and equal opportunities in the EU. Policy makers, especially with respect to big cities, tend to favor the construction of housing over commercial real estate. Building sites are rare, but in order to guarantee the sustainable development of cities, homes, workplaces, and infrastructure are equally important.

Member states of the EU should acknowledge the relevance of commercial real estate and infrastructure investments for the overall economic well-being. This explicitly does not include new subsidies which might result in painful bubble problems, but it does imply a level playing field for all kinds of construction activities.

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On the relevance and perspectives of commercial construction in the EU
Pekka Sagner / Michael Voigtländer IW-Report No. 32 5. September 2018

Pekka Sagner / Michael Voigtländer: On the relevance and perspectives of commercial construction in the EU

IW-Report

Download PDF

German Economic Institute (IW) German Economic Institute (IW)

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