Europe Biannual Construction Market Report 1Q/2Q 2025
Italy
Top opportunities
Data centres: Rising demand for digital infrastructure and energy-efficient facilities.
Energy: Focus on renewables like solar, wind, and hydropower.
Healthcare: Upgrades in hospitals and medical facilities, with a tech focus.
Hospitality and stadia: Growth in tourism drives hotel and sports venue projects.
Industrial, manufacturing and logistics: Increased demand for warehouses and logistics hubs.
Infrastructure: Transport and utility upgrades with EU support.
Top trends
Sustainable construction/net zero: Increasing focus on eco-friendly building practices and net zero energy solutions.
Use of digital tools, data and artificial intelligence: Rising adoption of digital tools and AI for project design, management, and efficiency in construction.
Local economic indicators
Italy's year-over-year (YoY) gross domestic product (GDP) growth for 2024, as reported by The European Commission, is expected to have been 0.7%. Growth is forecast to increase to 1% in 2025 and 1.2% in 2026, driven by rising consumption and Recovery and Resilience Plan (RRP) expenditure on infrastructure. However, the construction sector faced headwinds in 2024 due to the reduction and removal of housing renovation tax credits. In 2025, consumption is expected to drive GDP growth, while investment is projected to decline, primarily due to a decrease in housing renovation activity. When viewing GDP compared to the previous period, QoQ, Eurostat reports that Italy experienced stagnation with no growth between 2Q and 3Q 2024.
Eurostat also reports that in 2024, the construction industry’s gross value added, which measures its contribution to Italy’s overall GDP, remained stable at approximately 5% of the total GDP.
Eurostat's Harmonised Index of Consumer Prices (HICP) fell sharply, with an average rate of 1.1% being reported for 2024 down from much higher levels in recent years, mainly attributed to stabilising energy prices. Inflation is expected to rise modestly to 1.9% in 2025 before declining slightly to 1.7% in 2026.
Unemployment figures increased to 6.8% in 2024 with levels predicted to decline to 6.3% in 2025 and further to 6.2% in 2026 as economic recovery supports job creation.
Construction materials
Eurostat's November data on local industrial producer prices has exhibited relative stability on a month-over-month (MoM) basis, save for notable increases in electrical distribution, 4.5% and HVAC 3.3%. When looking at the YoY figures we also see a stable picture with a 12.7% increase in the price of wood standing out. When indexing for June 2022, when oil prices peaked due to the Russia-Ukraine conflict, we can see that electrical distribution and steel tubes experienced strong price recoveries of 27.7% and 22.9% — with wood experiencing the strongest price increase of 24.7%. See the following table for MoM, YoY and indexed pricing inflation:
Market outlook
In December 2024, Italy's construction confidence indicator, CCI, experienced a modest dip to 1.2 from 2.3 in November. This small decrease was mainly due to a decline in order books, which fell from 1.4 to -0.8, supported by a less significant drop in employment expectations, from 3.3 to 3.1.
Insufficient demand in December was recorded at 12.1, showing an improvement from November's figure of 14 and aligning with the 3Q/4Q average of 12.6. However, insufficient demand was not the most significant factor limiting construction activity with labour shortages remaining persistently high at 22.2 in December and averaging 24.3 over the same period.
Local office input
The Italian market in 2025 is set to witness significant investment activity, driven by renewed credibility and a reduction in inflation-related taxes. Among the key sectors, office and logistics investments are expected to remain progressive and stable compared to 4Q 2024. Rome and Milan will continue to be the focal points for office investments and asset reallocation, with a preference for core plus opportunities, though transaction volumes are projected to remain in line with the previous quarter. Meanwhile, logistics will see a continued alignment between supply and demand, reinforcing its positive growth trend through new core investments.
Interest in Purpose-Built Student Accommodation (PBSA) is surging, alongside strong activity in Build-to-Rent (BTR) and Build-to-Sell (BTS), though with varying investment volumes. The PBSA sector remains highly dynamic, driven by a growing influx of foreign students and a persistent shortage of suitable and affordable housing in key university cities. At the same time, the retail sector is experiencing renewed momentum, following broader EU trends. Shopping centres and high-street brands are now at the forefront of investment in Italy’s most active markets.
Tourism remains a pillar of the Italian economy, and 2025 will see continued expansion in the hospitality sector with rebrandings, new openings, and large-scale refurbishments accelerating growth, particularly in luxury and hybrid accommodation offerings. Meanwhile, under the RRP investment strategy, Italy is set to reap the benefits of public projects initiated over the past two years, with a ramp-up in construction activity expected to boost both productivity and employment.
Finally, the Data Centre (DC) sector continues to lead the Italian investment market in terms of economic volume and new project development. Its growth trajectory is reinforced by the increasing number of developers establishing DC operations across the country, confirming its role as a key driver of investment.
As always. Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact project programmes and costs. Undertaking risk analysis studies enables better evaluation and preparation of appropriate contingencies for your particular project conditions and risk exposure.
