Richard Joyce Managing Director, Europe
Europe will see a modest recovery in construction activity in 2025, with many countries returning to growth. However, geopolitical tensions could lead to instability in global trade, making near-term prospects more unpredictable.
Across the region, average GDP growth for 2025 is expected to slow to 1.4% – a slight decline of 0.1% – with major exporting economies such as Germany and Italy particularly exposed to weaker external demand and trade disruption.
While inflation has eased in most countries, tariffs and supply chain disruption could push prices back up, compounded by continued energy market volatility and rising wages. As a result, any potential cuts to interest rates may have a limited positive impact on spending capacity.
Amid this uncertainty, Europe’s construction industry has shown signs of resilience. With almost all countries in Western Europe expected to return to growth by 2026, following an overall 1.1% contraction in 2024. This recovery is being driven by major investment in energy decarbonisation and infrastructure, as well as a number of policy related supports across clean tech and advanced industrial manufacturing.
The data centre pipeline in Europe remains sturdy, as evidenced by Germany’s planned and in-progress construction projects currently sitting at €26.1bn (US$29.8bn). This is despite a slight market curve as developers re-assess capacity needs in light of the changing AI, cloud and advanced computing landscape.
As decarbonisation gathers pace, one challenge will be making sure that energy-intensive sectors, such as data centres, semiconductor fabs and pharmaceutical manufacturing retain and can access a stable and affordable power supply. This is the most critical constraint facing developers, and we are seeing an increase in corporate power purchase agreements and alternative energy sources becoming a top priority in project planning.
Despite ongoing economic headwinds and global uncertainties, Europe’s construction sector is poised for a modest rebound in 2025, underpinned by strategic investments in decarbonisation, infrastructure, and advanced industries - laying the groundwork for broader growth by 2026.
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