Market Analysis
Berlin construction sector
Residential construction Berlin May 2015: Record revenue but fewer new orders
In May 2015, revenue in Berlin's residential construction sector rose 22.4 percent. At the same time, new orders fell by more than a quarter. What the conflicting signals mean.
Peter Guthmann
Berlin's main construction sector recorded a revenue increase of 4.5 percent to 164.5 million euros in May 2015 compared with the same month a year earlier, according to the Berlin-Brandenburg Statistics Office. Growth was driven by building construction (up 11.1 percent), with residential construction standing out at plus 22.4 percent.
These revenues reflect the building activity of recent months. Numerous projects launched over the past few years are now reaching the billing stage.
New orders decline sharply
In contrast, new orders fell by more than a quarter to just 131.4 million euros. This was not a one-off dip: orders had already declined the previous month. Rising land and construction costs, along with increasing scarcity of available building plots in central locations like Mitte, are likely making developers more cautious in their planning.
Today's order drop becomes tomorrow's supply gap
The 25 percent slump in new orders translates into fewer completed apartments in two to three years. If Berlin keeps drawing new residents at the current pace, prices for existing stock will follow. Owners benefit when supply stays tight, and buyers should not expect more choice on the market any time soon.
Labour market holds steady
The number of employees in Berlin's construction sector rose slightly by 0.4 percent to 11,609 in May 2015. Companies are not cutting staff, suggesting they view the decline in orders as a normalisation after years of strong growth rather than the start of a downturn.
