Saudi Arabia is emerging as a significant player in the construction sector, with Bain & Company projecting a compound annual growth rate of 3.5 percent to 4.5 percent leading up to 2026. This growth is primarily driven by infrastructure investments, alongside a government initiative aimed at boosting home ownership, which is set to stimulate residential construction. Additionally, the kingdom’s ambitions to enhance its role as a hub for leisure and tourism are expected to bolster commercial construction.
“With a strategic focus on infrastructure expansion, residential development, and tourism, Saudi Arabia is poised to lead the region’s construction growth. The kingdom’s bold initiatives offer unparalleled opportunities for innovation and investment, aligning perfectly with global trends in modernized and sustainable development,” stated Dr. Houssem Jemili, senior partner within Bain’s Advanced Manufacturing Services and Technology Practices in the Middle East.
Gradual recovery in European construction markets
In Europe, construction markets are on the brink of a gradual recovery beginning this year, as indicated in Bain’s latest Building Blocks Construction Indicator. After enduring a prolonged two-year downturn, European construction is set to benefit from an uptick in infrastructure activity, which has shown greater resilience compared to other segments. This recovery is anticipated to coincide with a revival in residential construction across several European nations, along with a resurgence in office development driven by the demand for more sustainable workspaces.
Factors influencing European construction recovery
The expected rebound in the European construction sector is aided by an exceptionally low baseline following two years of declining activity, compounded by decreasing interest rates and inflation. Construction firms faced significant challenges during 2023 and 2024, described by Bain as a “perfect storm” of persistent inflation in labor and material costs, alongside supply chain constraints that led to diminished construction demand. However, Bain forecasts that the most severe impacts of these challenges will soon diminish, paving the way for a slow but steady recovery in demand.
Regional disparities in construction activity
The difficult conditions experienced in the construction sector over the past two years were widespread across much of Europe, although Bain’s analysis suggests that certain countries are closer to a turning point and a sustained improvement than others.
Infrastructure construction as a growth driver
Looking ahead, Bain concludes that infrastructure construction in Europe will continue to provide a solid foundation for growth through 2027. This growth will be supported by national budget commitments for upgrading aging infrastructure as well as modernizing Europe’s energy grids and developing new fiber optic networks. From 2025 to 2027, infrastructure construction activity is expected to grow at a compound annual rate of 2.5 percent to 4.5 percent in Italy and the Nordics, 2 percent to 4 percent in the U.K., 1.5 percent to 3.5 percent in Germany, and 0.5 percent to 2.5 percent in France.
Read more: Saudi Arabia’s construction market to exceed $90 billion by 2029
Office construction trends in Europe
Moreover, office construction is anticipated to witness robust growth across Europe, bolstered by new sustainability standards that necessitate both upgrades to existing buildings and new constructions. The demand for ultra-modern office spaces, particularly in light of evolving hybrid work models, is expected to drive this growth. From 2025 to 2027, office construction activity is projected to achieve compound annual growth rates of 2.5 percent to 4.5 percent in the Nordics, 1.5 percent to 3.5 percent in the U.K., 1 percent to 3 percent in both Germany and Italy, and 0.5 percent to 2.5 percent in France.
Residential construction outlook for Europe
Residential construction is forecast to rebound from 2025 to 2027 across most European nations, with the exception of Italy. A new wave of construction is anticipated, fueled by significant structural demand in various regions. The Nordics are expected to experience particularly strong growth, with compound activity increases of 6.5 percent to 8.5 percent, followed by France at 5 percent to 7 percent. The U.K.’s residential construction is projected to grow by 3 percent to 5 percent, while Germany is expected to see a more modest upturn with growth of 0 percent to 2 percent. In contrast, Italy’s residential sector may face further contraction, potentially declining by up to 2 percent, attributed to the lingering effects of a sector boom from 2020 to 2022.
