Western Mainland Europe Construction Market Report 2Q 2023
Italy
Local economic indicators
The Italian National Institute of Statistics (Istat) revealed that the country closed 2022 with an overall positive gross domestic product (GDP) growth rate at 3.7%, nearly half of that in 2021, recorded at 7%. Provisionally, 1Q 2023 is reported at 1.9%.
In its March report, A Fragile Recovery, the Organisation for Economic Co-operation and Development (OECD) forecast GDP growth for 2023 at 0.7%.
Istat showed 2022 annual inflation at 11.6%. Although the first quarter of 2023 presented three consecutive months of inflationary recovery, the second quarter started with a small increase in April (8.2%) which was once again recovered in May at 7.6%. These trends have been reflected in the Eurostat Harmonised Index of Consumer Prices (HICP), currently at 8.1% in May.
The International Monetary Fund (IMF) predicts overall 2023 inflation to reach 4.1% which means Italy has some recovery ahead in the second half of the year.
Construction materials
The local construction cost index reported by Istat shows some stability in construction costs for residential and industrial buildings. Industrial construction has hovered around 25% above that in December 2019.
This same stability can be seen in the industrial producer prices table below for key items including concrete, steel tubes and structural metal products. In contrast to nearly every other European country monitored by Gleeds, electrical distribution and HVAC items have experienced price reversal.
Market outlook
Construction confidence stood at 5.3 in May, an improvement from March (5.1) but less than the year’s peak in April (8.5).
Surveyed contractors are forecasting continuing work expectations in 2023 — at their highest in April at 11.3, with a small decline to 6.0 during May. Although labour shortage issues rose slightly in April and May, one encouraging change is less reports of price increases, following a peak in October.
Contractors are looking towards the heavy investments in infrastructure by local government, driven by NextGeneration EU projects, with a focus on modernisation by supporting and enhancing the local market through projects which target safety, efficiency, urban regeneration and new railways. New laws have been introduced to simplify strategies and facilitate awarding construction contracts.
Due to recent floods in central Italy, the environment and climate change are top priorities and, together with digitalisation, are raising awareness as construction becomes the main technology developer facing these challenges.
As Italy is considered one of the top five most relevant EU countries for data centre development according to some sources, Gleeds recently attended the Data Center Nation conference in Milan to meet with new and existing Mission Critical clients. Taking into account our own experience in the sector, Gleeds is well placed to help deliver some of the 300MW of development forecast for completion by 2025.
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. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure.
