Europe renovations to strengthen towards the end of the decade

Europe’s renovations will pick up towards the end of the decade. Material and labour costs remain high, slowing renovation activity and reducing affordability. Financing the scale of renovations required will be challenging given constrained household budgets and limited investment capacity. Government finances are also stretched after significant COVID-19 spending, leaving less scope for new large-scale subsidies.

The commercial property sector is undergoing a structural shift towards higher-quality, energy-efficient, amenity-rich, high-tech office and retail space. This “flight to quality” is driving renovation activity as demand for ‘premium’ workplaces grows.

Countries with the oldest and least efficient building stock face the highest renovation needs and costs. Italy in particular faces a steep adjustment: a large share of its stock is old, inefficient, and difficult to renovate due to architectural and structural constraints.

Social buildings, such as schools and hospitals, are central to the EU’s “just transition” agenda, as
renovating them delivers tangible benefits for vulnerable groups by reducing energy poverty, improving health outcomes and strengthening essential public services. Proposed exemptions for heritage and other high-cost public assets will limit renovation activity in this sector despite these buildings offering some of the greatest potential energy-efficiency gains.

Residential renovations present a significant opportunity for growth due to the sheer volume of Europe’s ageing and energy-inefficient housing stock. High numbers of vacant dwellings present a strategic opportunity: bringing these dwellings up to modern efficiency standards can provide both climate benefits and much-needed housing supply. Rising energy bills continue to highlight the long-term value of improving insulation, heating systems, and overall energy performance.