Europe Biannual Construction Market Report 1Q/2Q 2025
Portugal
Top opportunities
Aviation: Opportunities in airport expansion and modernisation projects.
Data centres: Rising demand for digital infrastructure, emphasizing energy-efficient solutions.
Energy: Investments in renewable energy projects like solar and wind, supported by EU goals.
Government and municipals: Public sector projects focused on infrastructure upgrades and urban development.
Top trends
Sustainable construction/Net Zero: Portugal is prioritising sustainable construction practices, driven by EU climate goals and national commitments to reduce carbon emissions. Developers are focusing on energy-efficient designs and renewable materials.
Use of digital tools, data and artificial intelligence: Digital transformation in Portugal’s construction sector is accelerating, with increasing adoption of AI and data-driven tools for project management, design optimisation, and improving efficiency.
Local economic indicators
Portugal’s year-over-year (YoY) gross domestic product (GDP) growth in 2024 is expected to have been 1.7%, a decline from 2023’s 2.5% growth as reported by The European Commission. The latter half of 2024 saw an acceleration in private consumption, driven by a strong increase in employee remuneration. The tourism sector also contributed significantly to growth, alongside a moderation in interest rates, however construction activity remained flat, and manufacturing contracted due to weak external demand for goods. Economic growth is forecast to rebound to 1.9% in 2025 and further to 2.1% in 2026, supported primarily by domestic demand. Private consumption is expected to benefit from real wage growth and investments from the Recovery and Resilience Plan (RRP), further bolstering the economy. When viewing GDP compared to the previous period, QoQ, Eurostat reports that Portugal experienced a positive movement of 0.2% between 2Q and 3Q 2024.
In Portugal, the construction sector’s gross value added (GVA) grew by 1.4% YoY between 3Q 2023 and 3Q 2024. Additionally, the QoQ data showed a positive change of 0.6% between 2Q and 3Q 2024. Eurostat also reports that in 2024, the construction industry’s gross value added, which measures its contribution to Portugal’s overall GDP, remained stable at approximately 5% of the total GDP.
Eurostat's Harmonised Index of Consumer Prices (HICP) fell sharply from 5.3% in 2023 to 2.6% in 2024, as prices decreased across most sectors except tourism-related services. Inflation is projected to decline further to 2.1% in 2025 and 1.9% in 2026.
Unemployment figures in Portugal remained relatively stable at 6.4% in 2024, a slight improvement from 6.5% in 2023. Further declines to 6.3% in 2025 and 6.2% in 2026 are expected, supported by positive net migration flows of working age people.
Construction materials
According to Eurostat the local industrial producer price index reveals that month-over-month (MoM) prices have remained relatively stable, except for electricity and electrical distribution which saw a significant increases of 8.5% and 8.8% respectively. A similar trend can be seen when viewing the YoY figures with smaller movement in wood, glass and concrete and comparatively large increases in electricity, gas, steam and HVAC supply and electricity distribution. When indexing for June 2022, when oil prices peaked due to the Russia-Ukraine conflict, we see a price increase in concrete of 14.6% standing out, with relative stability in all other sectors. See the following table for MoM, YoY and indexed pricing inflation:
Market outlook
In December 2024, Portugal’s construction confidence indicator, CCI, increased by 2.4 points, rising from 1.2 to a record-high of 3.6 since they started contributing to the survey in 1989. This strong improvement was driven mainly by a boost in employment expectations, which rose from 6.1 to 9, along with a smaller improvement in order books, which improved from -3.7 to -1.7.
The biggest challenge facing building activity in Portugal is a shortage of labour, although the situation improved slowly but steadily throughout 2024, with the figure decreasing from a high of 31 in January to a yearly low of 26.2 in December. However, this improvement was somewhat offset by a worsening of reported figures for price expectations, which increased over 4Q from 5.5 in October to 13.9 in December.
Local office input
The Portuguese construction sector is poised for significant growth, with positive trends across residential, non-residential, and civil engineering projects. In the housing market, demand remains strong, particularly among younger buyers benefiting from government initiatives, while high sales rates for ongoing projects are further supported by favourable interest rates and policies designed to improve housing access. However, challenges such as regulatory shifts and limited supply continue to shape market conditions, requiring careful navigation by stakeholders.
Non-residential construction is expected to maintain steady momentum despite economic uncertainties, as noted by the AICCOPN (Association of Civil Construction and Public Works Industries), while civil engineering projects advance due to public investments and strategic funding, reinforcing overall sector stability.
With businesses reassessing their workspace needs; Lisbon and Porto are experiencing a wave of development that is transforming the office market. The increasing demand for sustainable, high-quality workspaces that accommodate hybrid working models is driving rental prices higher, particularly in prime locations, as noted by leading office leasing advisors in Portugal.
As consumer habits evolve and tourism remains a driving force, the retail sector continues to demonstrate resilience and adaptability. To navigate economic fluctuations, retailers are expanding retail parks and enhancing high-street offerings, ensuring continued growth and resilience.
With supply chains transforming and sustainability at the forefront, logistics is undergoing a profound shift influenced by nearshoring trends and modern logistics solutions. However, supply constraints remain a challenge, making the prioritisation of sustainable practices essential for meeting evolving market needs. Additionally, Portugal’s favourable conditions for data centre growth, with ample land and conversion opportunities, are enhancing the potential for hyperscale facilities, positioning the country as a key player in this sector.
Overall, the Portuguese construction market is navigating both challenges and opportunities with a strong emphasis on sustainability, quality, and adaptability to economic shifts. Investors should closely monitor these developments to capitalise on emerging opportunities while effectively managing potential risks.
Gleeds recommends revising previously set project budgets to present-day figures based on local statistical information and our own internal data. Additionally, we advise investors to consider inflation contingencies in their budgets as materials and labour shortages remain unpredictable.
