The European construction market is entering 2026 with a mood best described as one of ‘pragmatic anticipation.This conclusion is drawn from a survey of 1,276 top executives from the construction and development sectors conducted as part of the annual Emerging Trends in Real Estate study.
The market no longer lives under the illusion of a rapid recovery, but neither is it frozen in anticipation. Market participants are prepared to operate under uncertainty, focusing on balanced decisions and long-term strategies.
After several years of crises — the pandemic, a surge in inflation, rising interest rates, and geopolitical conflicts — the industry no longer expects rapid growth or a return to previous performance levels. The focus is on adapting to a new reality.
1. Uncertainty as the New Normal for the EU Construction Sector
Geopolitics, trade conflicts, and deglobalization have become a permanent backdrop for the market.
Key pressure factors include:
- the war in Ukraine and instability in the Middle East;
- U.S. tariff and trade policies;
- slowing economic growth in Europe;
- the growing role of deglobalization and “friendly” supply chains.
For European construction companies, this means cautious planning, avoidance of excessive risk, and prioritization of projects with long-term demand.
2. High Construction Costs and Labor Shortages as the Industry’s Main Challenges
Construction costs, resource shortages, and the labor crisis are the top challenges for development in Europe.
Key constraints on construction:
- expensive materials;
- labor shortages;
- supply chain disruptions;
- rising financing costs;
- lengthy approval and permitting procedures;
- tightening regulations.
In several countries (Greece, Italy, the Netherlands, Germany), this is already leading to a decline in new projects and worsening housing shortages.
3. Shift in Focus: Less New Construction, More Renovation
Due to high construction costs, the EU market increasingly favors renovation, modernization, and repurposing of existing assets.
Popular strategies include:
- converting offices into residential or mixed-use properties;
- upgrading buildings to meet energy-efficiency standards;
- value-add projects — increasing the value of existing assets instead of large-scale new construction.
These approaches reduce risks and capital expenditure but require higher engineering and management expertise.
4. Construction Segments in the EU That Continue to Grow
Despite the overall slowdown, several segments continue to demonstrate resilient demand and investment support.
Most promising sectors:
- data centers;
- energy and green infrastructure;
- student housing;
- assisted living and senior housing;
- logistics and warehouses (including due to nearshoring of production, IT development, and business processes).
The common denominator across these segments is structural long-term demand rather than dependence on GDP growth.
5. ESG (Environmental, Social, Governance): From Ideology to Pragmatism
Environmental requirements in the EU construction sector remain important, but the approach is evolving.
Current trends:
- developers are fatigued by complex ESG bureaucracy;
- nearly half of companies have adjusted their ESG strategies;
- the focus is shifting from reporting to tangible risk and cost reduction.
At the same time:
- energy efficiency and climate risks have become critical factors in financing;
- buildings without green upgrades are losing liquidity faster.
6. Climate Risks as a New Design Factor in EU Construction
Floods, fires, and extreme weather events are increasingly considered at the design and site-selection stages.
For builders, this means:
- stricter location analysis;
- additional requirements from insurers and banks;
- higher upfront costs but lower long-term risks.
In some cases, sites with high climate risk are excluded from consideration altogether.
7. Digitalization and AI in Construction and Development
Artificial intelligence and digital tools are being rapidly adopted across the industry.
AI applications in EU construction include:
- design and planning;
- construction management;
- cost and timeline estimation;
- building operations.
These technologies help to:
- increase efficiency;
- reduce costs;
- compensate for labor shortages.
8. European Cities with the Best Construction Investment Prospects in 2026
Investors and developers increasingly focus on individual cities rather than countries as a whole.
Most resilient markets:
- London
- Paris
- Berlin
- Madrid
These cities share common traits: liquidity, legal stability, and long-term demand.
Conclusion
The European construction market in 2026 is defined by caution, efficiency, and long-term decision-making.
Key construction trends in 2026:
- less speculative and mass-market construction;
- more renovation and niche value-add projects;
- strong focus on costs, ESG risks, and climate considerations;
- growing importance of technology and operational management.
The survey of top executives shows that for companies capable of operating under uncertainty, this period is not a crisis — but a moment of transformation and a source of new opportunities.
Sources: Statista, PricewaterhouseCoopers (PwC), Urban Land Institute (ULI)
