17 February 2014

Arch Vision: Five European countries expected to see declining building volumes in 2014.

The construction sector in the UK, Germany and Belgium with small growth or similar to 2013.The architects' sentiment continues to be negative for Italy, France, Spain and Poland. In combination with a negative development of building permits in 2013, the construction sector in these countries is expected to decline in 2014. For the Dutch architects, Q4 2013 was the best since Q2 2011. Nevertheless, 2014 will still bring lower building volumes than 2013. UK has experienced the highest number of architects ever who saw their order book growing. These are some of the conclusions of the Q4 2013 European Architectural Barometer report, a quarterly research among 1,600 architects in eight European countries. European architects act as a leading indicator for the construction activities.
In Q4 2013, architectural companies in the UK show a strong development in the order book and turnover sentiment. In the last 5 waves there was a stable growth in the number of architects experiencing an increase in their order book. In Q4 2013, two thirds of the British architects have seen their order book growing against only 10% who reported decline in the order book. Since the start of the European architectural barometer survey, this is the highest number of companies with increasing order books ever registered. The number of architects expecting an empty order book in the next 12 months is lower than in the previous quarter: 21% versus 27%. Despite the very positive signals coming from the British architects the building permits for non-residential decreased significantly in 2013, in comparison to 2012. The building permits for residential show the opposite direction, but since the non-residential sector in the UK is bigger, this will have more influence on the total building sector. Arch-Vision therefore predicts a stabilization of the market in 2014 and a small increase of 1% in 2015.
From Q3 2010 onwards there has been a steady positive development among the German architects. In Q4 2013, both the German sentiment about the order book and turnover development were positive again, but with small changes in comparison to the results from the previous quarter. The number of architects with an increasing order book remained quite stable (36%). In Q4, only 4% of the architectural practices expected to see an empty order book in the upcoming 12 months. Also this indicator does not show significant changes on quarterly basis. These developments are in line with the development in building permits for both residential as well as non-residential buildings (slightly improving in 2013 when it refers to residential building permits and quite stable when related to non-residential building permits. Therefore Arch-Vision expects the following growth figures: 2014 (+1%) and 2015 (+3%).
The few signs of improvement noticed among the French architects in Q3 2013 were unstable and only temporary as compared to the previous quarter. In Q4 2013, there were more French architects experiencing a decreasing order book (47% in Q4 versus 44% in Q3), 38% had seen their order book decline by more than 5%. The new drops in the order book and turnover development show that the Frenchsituation continues to deteriorate. And it is also confirmed by the development of building permits. The building permits for residential show a negative trend, which becomes even worse in the course of the quarter. This downfall in building permits has a big impact on the French building sector since new build residential has a share of app. 28%. Although the building permits for non-residential show a positive development, it cannot make up for the loss of in the residential area (share of only 18% of total volume). Arch-Vision predicts that the French construction market will decrease in 2014 (-3%), but it will recover in 2015 (+1%).
Currently the Spanish architects report more or less the same developments in their order books as 3 months ago. The situation does not seem to have changed much for them: every one out of five firms report to have seen an increase in the order book, while the ones who saw their order book decline was almost double (37%). With every quarter of 2013 however, the Spanish architects were becoming more positive, feeling the bottom had been reached and improvements should follow: in Q1 2013, 49% of them expected empty order books in the next 12 months, while currently this is valid for 31% of them. Unfortunately the more positive attitude is not in line with the development in the building permits: especially the residential sector is showing a significant decline in building permits. The last development in the building permits made us adjust our prediction for Spain which looked more positive in Q3 2013. Given the latest results Arch-Vision concludes that the development in 2014 (-12%) will be similar to the one in 2013 (-11%). An improvement is not foreseen until 2016.
After a very bad second and third quarter 2013, in Q4, the majority of the Italian architects reported to have againexperienced a drop in the order book and turnover. For the third quarter in a row, approximately 78% of the Italian architects noticed a decline in their order book in comparison with the previous quarter. There are hardly any architects reporting an increase in their order book in Q4. Although the architects are hoping for a better 2014 (in Q4 2013, the share of architects expecting an empty order book in the next 12 months was 30%, while in Q1 2013, their share was 50%) improvement of the construction market in Italy seems to be far away. The outlook for the next twelve months is not very promising. Arch-Vision predicts a shrinkage of the market by 8% in 2014 and by 4% in 2015. This on top of the heavy decline in 2013 (-14%).
For the first time since Q2 2011, in Q4 2013 the number of the Dutch architects experiencing improvements (38%) was higher than the number of the architects with declining order books (30%). The improvements Arch-Vision observed among the Dutch architects since Q3 2013 have been also confirmed by National Bureau of Statistics (CBS), which in January 2014 published data about the increase in the building volumes (in €) of the new orders architects received in Q3 2013. At the moment 25% of the Dutch architects expect an empty order book within the coming 12 months, which is less pessimistic than in the second quarter of 2013 (31%). Despite the positive architectural sentiment, the building permits show a slight decrease in numbers in 2013 compared to 2012, so therefore Arch-Vision predicts a small decline in 2014 (-1%), but a slight recovery in 2015 (+1%). This positive development is based on the temporary VAT reduction on renovation activities (early 2013 – end 2014) and positive developments on the housing market.
Only 7% of the Belgian architects expect an empty order book in 2014. Although higher than the previous quarter, it is still a relatively low figure. Furthermore, since Q2 2013, the number of architectural practices seeing their order book growing is higher than the number of those who experienced declining order books (in Q4 43% vs. 19%). The building permits figures, especially for residential buildings are quite stable, and a drop in the non-residential ones can be seen. Nevertheless, the positive sentiment among Belgian architects is most likely influenced by work on renovation projects. This leads to a prediction of the Belgian construction sector by Arch-Vision which is one of modest growth: +1% (2014) and +1% (2015).
Similarly to the previous quarters, there were more Polish architects in Q4 2013 that experienced their order book declining than those who saw growing order books (resp.: 41% vs. 28%). It is a positive sign that the number of architects that expect an empty order book within the next 12 months dropped from 31% to 20%. Poland is a country which heavily relies on new build when it comes to the construction sector (73%). So it could be alarming that the figures of the architectural sentiment are still negative. This is also the case for the residential building permits: they show a declining trend for a second year in a row. All together Arch-Vision expects that the Polish construction sector will end up 2014 with building volumes which are 2% lower than 2013. And -1% in 2015.
These and many other results and trends of the developments of the European construction market can be found in the European Architectural Barometer, an international market research conducted among 1,600 architects in Europe. This study is conducted in Germany, France, Italy, Spain, United Kingdom, the Netherlands, Belgium and Poland by Arch-Vision four times a year. Besides indicators to forecast the European building volumes, a specific topic is highlighted each quarter. The topic in Q4 2013 was "Building Information Modelling (BIM)". Architects can be used not only as a reliable source for future building volumes information, but their role is very important as they have great influence on how projects are built and which materials are used.
For more information about Arch-Vision please contact Ms. Ralitsa Ruseva, Project Manager Arch-Vision:

Arch-Vision BV
Max Euwelaan 51
NL-3062 MA Rotterdam / Netherland
Tel +31 (0) 10 206 6900
Fax +31 (0) 10 206 6901
E-mail: ruseva@arch-vision.eu