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Construction Industry in Germany:

Structural Data on Production and Employment


Facts and Figures for 2010
Abstract

Research programme: Future of the Construction Industry Project timeline: September 2010 - August 2011 File reference: 10.08.17.7-10.35 On behalf of: The Federal Ministry of Transport, Building and Urban Development (BMVBS)
as well as the Federal Institute for Research on Building, Urban Affairs and Spatial Develop ment (BBSR)
Agent: Deutsches Institut fr Wirtschaftsforschung DIW Berlin:
Martin Gornig, Bernd Grzig, Hendrik Hagedorn and Hella Steinke

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Construction Volume Development


Medium term trends suggest that despite several set-backs Germanys construction in dustry is heading for growth. In 2010, real construction volumes registered 10% above those recorded in 2005, with the latter marking an all-time low in long-term reporting. After five con secutive years of steady decline, 2006 saw the first strong and renewed growth in construc tion volumes, although much of this development was due to a major one-time effect: Ger manys value-added tax increase towards the end of the year. 2008, too, commenced with a positive growth trend in line with a strong economic environment. And despite the onset of financial crisis some time during the second quarter, the overall fiscal year results still showed an increase of 2.3 per cent after adjustment for price. Once again, this growth re sulted almost entirely from an exceptional upsurge in commercial construction, an expansion that lasted well into the fourth quarter and gained this segment an annual growth rate of 6.6 per cent (table 1).

Table 1 Key data on the development of Construction volumes in Germany


2007 2008 2009 2010 2008 2009 change in % 5.6 5.7 5.0 3.2 3.2 3.3 2.3 2.5 1.7 0.1 0.2 -0.7 6.6 7.3 4.6 1.4 1.6 0.8 -0.3 -0.5 0.1 0.9 1.0 0.8 -1.3 -1.4 -0.7 -1.1 -1.1 -1.3 -3.7 -4.0 -2.4 3.5 3.4 3.8 4.2 4.3 3.5 1.4 1.4 1.3 2.7 2.9 2.2 4.0 4.1 3.6 0.7 0.7 0.6 2.5 2.5 2.4 2010 in billion euros at the respective years prices Total construction volume Old Lnder1 New Lnder and Berlin1 Price development Old Lnder New Lnder and Berlin Total construction volume Old Lnder New Lnder and Berlin By construction sector Housing Old Lnder New Lnder and Berlin Commercial Old Lnder New Lnder and Berlin Public sector Old Lnder New Lnder and Berlin 1 According to company seat.
Source: Calculations and projections by DIW Berlin based on official construction statistics.
264.49 213.01 51.48 112.1 111.8 113.4 235.96 190.56 45.40 127.42 109.14 18.28 73.07 55.47 17.60 35.47 25.95 9.52 279.32 225.25 54.07 115.7 115.4 117.2 241.39 195.24 46.15 127.50 109.35 18.15 77.92 59.52 18.41 35.97 26.38 9.60 278.35 224.22 54.14 116.8 116.5 118.1 238.34 192.49 45.84 126.04 108.12 17.92 75.07 57.11 17.97 37.23 27.27 9.96 289.96 233.92 56.04 118.4 118.1 119.7 244.83 197.99 46.84 131.13 112.56 18.57 75.56 57.49 18.07 38.14 27.95 10.20

2000 indices = 100

in billion euros at 2000 prices

In 2009, the year of crisis, construction proved extremely resilient. Compared to the previous years figures and adjusted for price, construction volumes only dropped by 1.3 per cent and

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__________________________________________________________________________ thus did significantly better than the economy as a whole; in the same year, Germanys GDP had dropped by 4 per cent in real terms. Commercial construction even bucked the trend and grew at a slightly above-average rate. Nevertheless, the construction industry owed a lions share of this stability to public support measures. For example, the states extension of its energetic building modernisation programme an integral part of the first economic stimulus package or the official increase of the deductable maximum for household-related services both had a direct impact on housing construction volumes. All in all, residential construction declined only slightly by 1 per cent. Direct government building initiatives also helped to stabilise the industry. Thanks to the states stimulus packages, public surface construction even grew by 3.5 per cent in real terms.

In 2010, these stimulus packages and state incentives continued to bolster and invigorate the construction industry, although compensation and substitution effects as well as rising prices limited real-term growth of public construction volumes to 2.5 per cent. Commercial construc tion, on the other hand, enjoyed a marked and generally unexpected upturn in 2010 de spite a sharp slump in 2009. While this might be a direct result of renewed optimism and de mand expectations as well as the industrys increasing capacity utilisation, one should not forget the ongoing momentum and effect of the states stimulus packages. Generally speak ing and according to projections, commercial construction volumes in Germany grew by al most 1 per cent in 2010.

At the same time, residential construction has undergone a series of strong structural chang es over the past few years, driven by a clear shift from new construction activities to im provement and maintenance measures on existing buildings (see table 3). Financial market volatility, among other factors, suggests a continuation of this trend in residential construc tion. Compared with other reputedly secure financial investments, housing once again prom ises attractive returns. And this trend is further strengthened by public measures from the first stimulus package. Nevertheless, new residential construction also shows signs of recov ery, albeit starting from a relatively low level. After the 2009 slump, real-term residential con struction volumes are expected to rebound by 4 per cent in 2010.

All in all, building activities in Germany most likely topped 2009 construction volumes by 2.5 per cent in 2010, reaching a nominal value of 290 billion euros (table 1).

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New Construction
In 2009, new residential construction volumes in Germany amounted to a nominal 31.4 billion euros (table 2) perhaps the lowest ever result recorded since the countrys reunification. This downward trend did not start overnight, but developed in several surges: Periods of rela tively stable new construction volumes were succeeded by years of substantial decline. 2007 was one of those years. Compared to 2006, new construction dropped by almost 19 per cent. By 2008, this decline in new construction had finally slowed down, yet the rates of de crease remained very high at a nominal 13 per cent. In 2009, however, the industry showed first, tentative signs of recovery and a stabilisation of new residential construction at a rela tively low level. Table 2 Structure of housing construction services in Germany
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 in billion euros at the respective years prices Volume of new construction1 Private residential buildings Apartment buildings Construction on existing build ings2 Total volume of housing construc tion 52.74 40.86 11.88 91.89 144.63 49.29 39.32 9.97 86.78 136.07 49.54 40.09 9.45 83.79 50.80 41.38 9.42 81.86 44.26 35.62 8.64 82.93 127.19 45.77 36.19 9.58 37.03 28.31 8.72 32.16 23.99 8.17 115.61 147.77 31.39 23.00 8.39 34.14 24.87 9.27

90.29 106.26 136.06 143.29

116.36 122.19 147.75 156.33

133.33 132.66

change in % Volume of new construction Private residential buildings Apartment buildings Construction on existing build ings2 Total volume of housing construc tion
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-18.6 -17.9 -21.0 3.7 -5.7

-6.5 -3.8 -16.1 -5.6 -5.9

0.5 2.0 -5.2 -3.5 -2.0

2.5 3.2 -0.3 -2.3 -0.5

-12.9 -13.9 -8.3 1.3 -4.1

3.4 1.6 10.9 8.9 7.0

-19.1 -21.8 -9.0 17.7 5.3

-13.2 -15.3 -6.3 8.8 3.1

-2.4 -4.1 2.7 0.7 0.0

8.8 8.1 10.5 5.0 5.8

composition in % Volume of new construction Private residential buildings Apartment buildings Construction on existing build ings2 Total volume of housing construc tion
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36 28 8 64 100

36 29 7 64 100

37 30 7 63 100

38 31 7 62 100

35 28 7 65 100

34 27 7 66 100

26 20 6 74 100

22 16 6 78 100

21 16 6 79 100

22 16 6 78 100

1 Projections on the basis of estimated construction costs (construction activity statistics) plus surcharges for architectural fees and services, outdoor facilities and investors own contributions. 2. Building and housing modernisation measures (incl. conversion and extension work) as well as maintenance and renovation
services by the construction industry.
Sources: Federal Statistical Office, statistics of construction activity; calculations of construction volumes by DIW Berlin; survey
of architects by Heinze GmbH; 2011 projections by DIW Berlin.

Against this background, 2010 heralded a strong upward trend in new residential construc tion. For multi-storey dwellings, growth rates most likely exceeded 10 per cent. And after pro longed lean times, new construction of owner-occupied buildings, too, saw a marked upturn.

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__________________________________________________________________________ Compared to the previous year, nominal growth of new housing construction easily sur passed 8 per cent in 2010.

At a little under 28 billion euros (nominal values, table 3), 2010 projections of new nonresi dential construction activities are almost on par with new residential construction volumes at an estimated 34 billion euros. However, it should be noted that new construction of nonresi dential buildings went through a number of different phases. Between 2003 and 2005, for example, nominal new construction volumes in this segment dropped sharply, falling from 32 billion euros to just above 24 billion euros. In line with the 2006 global economic recovery, construction of new nonresidential buildings picked up again and growth rates approached 7 per cent, followed by impressive increases of 10 per cent in both 2007 and 2008. At the same time, these growth rates also reflect the strong upward price trend of construction ser vices in general.

Table 3 Structure of construction services of nonresidential buildings in Germany


2003 2004 2005 2006 2007 2008 2009 2010 in billion euros at the respective years prices Volume of new construction Offices, administrative buildings Hotels, restaurants, institutions Production, trade and storage structures1 Other nonresidential premises2 Construction on existing buildings Total volume of nonresidential construction3 28.19 6.37 4.18 12.01 5.63 34.63 62.82 25.99 5.40 3.92 11.24 5.44 35.28 61.27 23.94 4.67 3.72 10.36 5.19 37.45 61.39 25.53 4.83 3.44 11.90 5.36 40.73 66.26 27.88 4.93 4.22 13.21 5.52 45.85 73.73 30.78 5.13 4.10 15.38 6.19 50.74 81.52 30.11 5.54 4.48 13.09 7.00 51.26 81.36 27.66 4.75 4.00 11.29 7.62 56.87 84.54

change to the previous year in % Volume of new construction Offices, administrative buildings Hotels, restaurants, institutions Production, trade and storage structures1 Other nonresidential premises2 Construction on existing buildings Total volume of nonresidential construction3 -12.4 -28.4 -2.0 -9.3 -2.5 0.9 -5.5 -7.8 -15.3 -6.4 -6.4 -3.3 1.9 -2.5 -7.9 -13.4 -5.1 -7.8 -4.7 6.2 0.2 6.6 3.2 -7.4 14.9 3.4 8.8 7.9 9.2 2.2 22.6 11.0 2.9 12.6 11.3 10.4 4.0 -2.9 16.4 12.1 10.7 10.6 -2.2 8.0 9.3 -14.9 13.2 1.0 -0.2 -8.1 -14.3 -10.6 -13.7 8.9 11.0 3.9

composition in % Volume of new construction Offices, administrative buildings Hotels, restaurants, institutions Production, trade and storage structures1 Other nonresidential premises2 Construction on existing buildings Total volume of nonresidential construction3 44.9 10.1 6.7 19.1 9.0 55.1 100.0 42.4 8.8 6.4 18.3 8.9 57.6 100.0 39.0 7.6 6.1 16.9 8.4 61.0 100.0 38.5 7.3 5.2 18.0 8.1 61.5 100.0 37.8 6.7 5.7 17.9 7.5 62.2 100.0 37.8 6.3 5.0 18.9 7.6 62.2 100.0 37.0 6.8 5.5 16.1 8.6 63.0 100.0 32.7 5.6 4.7 13.4 9.0 67.3 100.0

1 Including agricultural buildings.


2 Including all other non-agricultural buildings.
3 Construction volumes in commercial and public construction.
Sources: Federal Statistical Office, statistics of construction activity; calculations of construction volumes by DIW Berlin; survey
of architects by Heinze GmbH; 2011 projections by DIW Berlin.

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__________________________________________________________________________ Generally speaking, new nonresidential construction declined slightly (by 2 per cent) in 2009, triggered by a marked drop in the new construction of production, trade and storage facilities due to the burgeoning export crisis. And while other areas of new construction enjoyed en couraging momentum in 2009, by 2010 these were also affected by the repercussions of the global crisis. Office and administration buildings as well as hotels, restaurants and institutions registered two-digit declines. Across Germany, new nonresidential construction dropped by more than 8 per cent.

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Construction services on Existing Buildings


While long-term trends point towards a steady decrease of new construction, maintenance measures continue to grow in importance. According to DIW calculations, 156 billion euros were spent on residential construction in 2010. Of this, a little over 34 billion euros went into new construction services while the rest i. e. more than 122 billion euros was spent on residential renovation and maintenance measures (table 2). According to these figures, maintenance-related construction accounted for 78 per cent of all residential construction last year a sizeable rise from 64 per cent in 2001.

And this trend is also evident in nonresidential construction. According to projections, new construction accounted for 28 billion euros of total construction volumes (almost 84 billion euros) in 2010, leaving 57 billion euros for nonresidential maintenance measures (table 3). Thus, two-thirds (or 67 per cent) of all nonresidential construction was maintenance-related last year, rising from 55 per cent in 2001.

In order to chart this rising importance of construction services on existing buildings, DIW published its first set of model calculations on the structure of maintenance and renovation related construction volumes, also incorporating survey and statistical projection data from a Heinze GmbH study. The results demonstrate that, at 100 billion euros in 2010, partial mod ernisation measures accounted for the lions share of all residential maintenance measures, while almost 14 billion euros were spent on maintenance and repair services. Third and last in line, comprehensive modernisation measures might only account for the smallest share of this particular construction segment, yet they still managed to attract 8 billion euros in 2010. Compared with new residential construction volumes (around 34 billion euros) this is a sizeable sum and a major factor in the provision of living space at new construction standards (table 4).

In nonresidential construction, too, work on existing buildings was dominated by partial mod ernisation measures. In 2010, almost 30 billion euros went into related services. At the same time, partial modernisation only accounted for 50 per cent of all construction on existing non residential buildings far less than in housing where partial modernisation claims more than 80 per cent. In nonresidential construction, comprehensive modernisation as well as general maintenance and repair play a more prominent role. According to DIW model calculations, and in accordance with national accounts and Heinze GmbH projections, both of these cate gories attracted around 14 billion euros each. In monetary terms, 2010 maintenance and

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Table 4 Structure of construction on existing buildings in 2010


Residential construction Nonresidential construction in billion euros Comprehensive modernisation measures Partial modernisation measures Maintenance Total Share of energy efficiency related retrofitting Comprehensive modernisation measures Partial modernisation measures Maintenance Total Share of energy efficiency related retrofitting 7.97 100.69 13.53 122.19 42.28 14.41 28.49 13.98 56.88 15.17 composition in % 6.5 82.4 11.1 100.0 34.6 25.3 50.1 24.6 100.0 26.7 12.5 72.1 15.4 100.0 32.1 22.38 129.18 27.50 179.06 57.45 Total construction

Sources: Federal Statistical Office; Heinze GmbH; 2011 calculations by DIW Berlin.

It should be noted that retrofitting measures to increase energy efficiency played a major part in elevating the impact of construction on existing buildings. As part of the construction vol ume calculations, more than 57 billion euros were spent on such measures in 2010. Of the se, energy-efficient retrofitting of housing accounted for more than 42 billion euros while non residential improvements claimed a 15-billion-euro share, highlighting the increasing im portance of energy-related retrofitting measures for the construction industry as a whole. Today, almost a quarter of all surface construction falls into this category. At the same time, these figures disprove the widespread public notion that maintenance measures are solely motivated by state incentives and the promotion of energy-related retrofitting: At least two thirds of all construction on existing residential buildings and three-quarters of such measures on nonresidential structures is not directly attributable to such incentives.

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Employment Figures in Construction


Ever since the mid-1990s, employment in the construction industries has fallen at a steady rate. A comparison of different statistical sources, however, reveals considerable disparities (table 5). According to official statistics, employment dropped by almost a quarter between 2001 and 2005, discounting the stabilising effect of small businesses. Taking these into ac count, calculations by DIW Berlin arrive at a significantly lower drop in construction-related employment for the period in question: According to DIW figures, employment declined by little more than 20 per cent between 2001 and 2005. And factoring in a boost of marginal employment, VGR figures even postulate a decrease of merely 16 per cent.

Table 5 Comparative data on employment in the construction sector


2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* figures per 1000 individuals Official census (TE) Main construction industry Finishing trades In-house calculations (DIW)2 Main construction industry Finishing trades Difference between census and DIW figures3 National accounts (VGR)
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1506 969 538 2231 976 1255 -724 2598 -367

1395 896 499 2065 898 1167 -670 2439 -374

1290 833 457 1952 837 1115 -662 2322 -370

1223 786 437 1864 785 1079 -641 2254 -390

1146 734 413 1780 746 1035 -634 2179 -399

1133 729 404 1824 728 1096 -691 2174 -350

1132 720 411 1826 721 1105 -694 2209 -383

1137 715 422 1850 716 1134 -713 2193 -343

1149 715 434 1841 718 1123 -692 2204 -363

1172 727 445 2232 -

Difference between DIW and VGR figures5

* Due to changes in the reporting cycle, figures in italics are not strictly comparable with previous results.
1 Employees working in construction companies (including trainees) and self-employed individuals (actively involved owners
and relatives who assist). Data for the reference month of June.
2 Employees working in construction companies (including trainees) and self-employed individuals (actively involved owners
and relatives who assist). Data for the reference month converted into annual means.
3 Corresponds primarily to employees in companies in the finishing trades with fewer than 10 employees.
4 Individuals working in Germany irrespective of duration of work or other main sources of employment. Annual average.
5 Figures correspond roughly to the number of part-time employees in the construction industry.
Sources: Federal Statistical Office, Fachserie 4, Reihe 5.1, Beschftigung und Umsatz der Betriebe im Baugewerbe; Fachserie 14, Reihe 8 Umsatzsteuer; Fachserie 18, Reihe 1.4, Volkswirtschaftliche Gesamtrechnung. Calculations and projections by DIW Berlin.

Since 2006, the stable and in part even expansive development of production volumes has helped to reverse this downward trend. According to calculations by DIW Berlin, 2006 annual averages heralded a strong employment boost. Over the following years, employment levels remained relatively stable with a modest upward trend in the finishing trades offset by a slight decline in main construction.

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__________________________________________________________________________ Official statistics even suggest a slight uptick in employment. However, due to changes in the reporting cycle, the 2009 results are not directly comparable to those from 2008. So, despite the 2009 drop in real production volumes, statistics registered relatively unchanged figures thanks to employment-stabilising government measures that triggered a temporary lowering of average employee productivity. In turn, and despite a very strong increase in real produc tion volumes, employment only grew by a moderate amount in 2010.