Brief analysis

Energy-efficient building refurbishment as the key to CO2 reduction in the building sector.

To achieve the net-zero target for CO2 emissions in the building sector, the façade, roof, windows and heating components (i.e. insulation of the building envelope and utilisation energy generation) are key. As things stand, 15.7 million buildings in Germany alone need to be comprehensively refurbished in order to fulfil the required energy efficiency standard set by the EU Commission and the German government. Now that manufacturers of all components have massively expanded their capacities in recent years, we believe that the bottleneck will be in construction/installation.

For this reason, in addition to the necessary costs (here we have factored out all expected material and wage price increases, so this is an extremely conservative calculation), we have recorded and analysed the capacities in the construction phase.

The results of our analysis show that it will not be possible to achieve the targets by 2045 in any of the trades. We have also made a conservative calculation for capacities and assumed that the refurbishment rates of the past can be maintained and that all capacities will be used purely for refurbishment - which is rather unlikely given the continuing shortage of housing; however, a look at demographic trends and the age cohorts in the building trade shows that we must assume a further shortage of personnel over the next 20 years.
 
This means that a significant increase in labour costs can be expected, which can be passed on to customers at least 1:1 by installers due to the critical fulfilment requirement. Furthermore, this means that processes and technologies (e.g. modular construction methods) that increase the output per FTE achieve a growing profitability effect; however, these measures can only be implemented by larger trade groups.
 
In fact, this means that consolidation in the building trade will increase significantly and the profitability levels between large and small players will be further spread. Furthermore, it can be assumed that, contrary to current experience, well-managed craft groups will be a highly attractive asset class in the future.
Back

Your contact person

Christoph Blepp
Christoph BleppManaging Partner

Christoph is a founding partner of S&B Strategy GmbH and is responsible for strategy development and implementation.

He has 17 years of experience as an officer, strategy consultant and managing director, gained at PwC Deals Strategy, smaller consultancies and the German Armed Forces. He studied Political Science and Economics at the University of the German Armed Forces in Munich and completed an MBA at WFI.