Rising Optimism for Germany's Civil Engineering Sector

The German civil engineering sector is witnessing a resurgence as capacity utilization among deep construction companies has risen significantly. According to recent data from the Ifo Institute in Munich, the adjusted utilization rate increased by 2.5 percentage points in March, reaching 72.6%. Experts from the institute report that firms are now operating more frequently at higher capacity levels.

This upward trend is expected to continue, with forecasts suggesting that capacity utilization could potentially rise to record levels over the next two years, surpassing the previous high of approximately 80%. A key factor contributing to this optimistic outlook is the federal government's new infrastructure fund, which is anticipated to stimulate demand in the coming years. However, experts caution that a rapid expansion of capacity in the civil engineering sector, which includes road construction, will not be instantaneous. Investments and necessary adjustments will require time, although the long-term funding period of twelve years is expected to provide companies with the stability needed to plan and invest in new capacities effectively.

In contrast, the situation in the building construction sector remains challenging. The current utilization rate in the high-rise construction segment stands at 62.1%, a significant drop from around 80% at the beginning of 2022. This decline is primarily attributed to a lack of orders in the residential construction market. Although there has been a slight increase in capacity utilization for high-rise construction, this improvement comes from a much lower baseline.

Transitioning resources--such as labor and machinery--from high-rise construction to deep construction is not straightforward. Experts indicate that this shift is only feasible for less specialized tasks, which complicates the balancing act between the two sectors.

According to the Main Association of the German Construction Industry, deep construction accounted for approximately 41% of revenues in the construction sector last year, while high-rise construction made up 59%.