RICS: Sentiment in the construction industry rises in most regions worldwide and outlook for credit conditions also recovers somewhat

At the regional level, one of the more noticeable developments in the second quarter was the partial recovery in the MEA region, where the overall index rose to +19 (after +8 in the first quarter). Although this has made up for much of the deterioration recorded in the previous quarter, the current value is still below the level at the end of last year. Europe also recorded a more stable development, with the CSI rising to +17 (after +7), continuing the gradual recovery in regional sentiment. The Americas region continues to have the strongest score of the four regions. Here, the CSI rose to +29 (after +21), continuing the solid positive momentum that has been observed for two years. In contrast, the APAC region declined slightly to -2 (from 0 in the first quarter) and continues to weigh moderately on the global total.

In terms of country-level construction workload, Nigeria proved to be the strongest market in the second quarter with a net balance of +40%, compared to +17% in the first quarter, reflecting a significant acceleration in activity across all sectors. India also recorded a net balance of +40% in total construction workload, while Germany and the United States reported similarly strong readings (+33% each), indicating solid growth in activity.

Growth also remains clearly positive in numerous other markets. Singapore recorded a net balance of +28%, followed closely by Oman and Saudi Arabia with +27% each. This underlines the resilience of construction activity in parts of the Middle East despite a particularly challenging geopolitical environment. While most other countries surveyed continue to report increasing workloads, the pace of growth is generally more moderate than in the leading markets.

At the weaker end of the scale, South Africa (-1%) and the UK (-2%) moved largely sideways, while New Zealand (-13%), Hong Kong (-17%) and France (-20%) each saw declines in activity. Qatar remained under pressure with a net balance of -26%, but China remained the weakest market by a significant margin, recording a value of -42%.

Looking at the sectoral breakdown, infrastructure continues to outperform other market segments in many regions, with the global net balance for current infrastructure workload rising to +23% (from +20%). Private commercial real estate construction activity moved towards broadly stable conditions at the global level (net balance of 0%, after -3%), while private residential construction remained moderately negative at -6% (after -3%). In contrast, respondents point to stable conditions in the private sectors in a growing number of markets, with this development particularly evident in Europe and MEA.

In contrast to the downward revisions made in the first quarter, respondents generally raised their expectations for workloads for the next 12 months again this quarter. At the global level, the net balance for infrastructure workload continued to increase to +45% (after +40%) over the next 12 months, underlining the sector's role as the most resilient area of the outlook. Notably, the net balance of expectations for private commercial real estate construction rose to +23% (after +13%), while expectations for private residential construction remained broadly stable at +15% (unchanged from the first quarter). The improvement in the outlook for private commercial real estate construction represents the largest change in this time series within a quarter for quite some time.

At the regional level, MEA saw a significant recovery in forward-looking confidence, with respondents in the region recouping some of the decline seen in the first quarter. The net balance for infrastructure expectations over the next 12 months rose again to +40% (after +17%) in MEA, while expectations for private commercial real estate construction rose to +32% (after +16%). Europe also saw a broad-based improvement in expectations in all three sectors. In the Americas region, expectations for the next 12 months remained clearly positive, although the pace of improvement slowed compared to the first quarter. In APAC, expectations remained broadly stable, with continued strength in India and Singapore contrasting with more subdued figures from China and Hong Kong.

In contrast to the strong increases recorded in the first quarter, cost forecasts for the next 12 months were more mixed in the second quarter. The forecasts for material costs fell slightly to 6.1% (from 6.4% in the first quarter), which brought the forecast series for total construction costs down to 5.8% (from 6.1%). In contrast, expectations regarding the cost of skilled labour rose to 4.9% (from 4.5%). At the same time, the net balance for the current profit margins became less negative at -19% (from -29% in the first quarter), indicating some easing of the pressure on margins seen in the previous quarter. In addition, the net balance for profit margin expectations for the next 12 months at global level turned positive for the first time in more than a year, reaching +12% (after -1%).

In terms of barriers to activity, material costs remain the most frequently cited factor, cited by 69% of respondents (largely unchanged from 67% in the first quarter). Financial restrictions are the second most frequently mentioned factor at 65% (after 62%). However, the more noticeable change this quarter concerns the workforce. The proportion of respondents citing a labour shortage rose significantly to 47% (up from 39%), while the proportion of those citing a shortage of skilled workers increased to 53% (up from 48%). This corresponds to the picture of increasing activity, which increases the pressure on the availability of resources. In contrast, 47% of respondents cited insufficient demand (slightly down from 53%), while 39% (up from 45%) mentioned insufficient demand.

The credit conditions data series showed a significant recovery in the second quarter, recovering much of the deterioration recorded in the first quarter. At the global level, the net balance of respondents reporting a deterioration in credit conditions in the past three months improved to -15% (down from -18%). Even more remarkable was the significant change in expectations. The net balance for the next three months rose to -6% (after -23% in the first quarter), while the net balance for the next 12 months increased to 0% (after -14%), reaching a neutral level for the first time in several quarters. The improvement is in line with a partial normalization of bond yields and inflation expectations since the peak of the shock in the first quarter and points to a much more supportive financing environment for the year ahead.

The GCM's results for Europe in the second quarter of 2026 show a clearly consolidated regional picture. Accordingly, the Construction Sentiment Index (CSI) rose to +17 (after +7 in the first quarter of 2026). The improvement is broad-based, as all six markets surveyed recorded higher CSI values than three months earlier. Italy made a remarkable turnaround and returned to positive territory, while the decline in France moderated significantly. Forward-looking sentiment also improved in most sectors, with earnings margin expectations in particular brightening significantly, even as workforce-related concerns come to the fore.

At the European level, Germany continues to lead the markets surveyed, with the figure increasing to +36 (after +27 in the first quarter), supported by solid momentum in all three sectors. The Netherlands also saw a significant improvement, with the CSI rising to +35 (after +19), largely driven by stronger infrastructure activity. Results in Italy were more positive in the second quarter, with the CSI rising to +10 (from -15), driven by improvements in both private sectors. Ireland gained slightly to +12 (after +9), while the UK returned to neutral territory with +2 (after -9). France remained the weakest market in the region at -8, although this represents a much less negative development compared to the previously recorded value of -24.

At the sectoral level, the current workload in private commercial real estate construction increased, with the net balance rising to +11% (after +1%). Private housing activity strengthened slightly, recording a net balance of +5% (after +2%), while infrastructure workload remained stable at a net balance of +22% (after +21%), continuing to support activity in the region. At the same time, the current value for profit margins recovered to a net balance of -7% (after -30%) and the employment indicator moved out of negative territory at +3% (after -3%). The figures for Germany show an increase in all sectors: in private residential construction from +20% to +22%, in private commercial real estate construction from +13% to +33% and in infrastructure from +29% to +44%.

Material costs remain the most frequently cited issue, cited by 64% of respondents (up from 63% in the first quarter), while the proportion of financial constraints mentioned rose to 60% (up from 52%). Even more remarkably, the proportion of respondents citing a labor shortage increased significantly to 58% (up from 28%), while the skills shortage rose to 61% (up from 52%). Competition also increased, which is in line with firmer levels of activity and increasing pressure on resources. In contrast, 37% of respondents cited insufficient demand (up from 46%), reflecting the improvement in market conditions. In Germany, material costs and a shortage of skilled workers are at the top of the list of factors restricting construction activity, accounting for 56% each.

Expectations for the next 12 months regarding workload in private residential construction rose to a net balance of +23% (after +14%), while expectations for private commercial real estate construction rose to +31% (after +18%). Expectations for infrastructure fell slightly to +33% (from +38%), but remain clearly positive. Employment expectations improved to +20% (after +11%), pointing to a stronger employment outlook. Importantly, profit margin expectations for the next 12 months turned positive (+13% after -19%). This represents one of the most notable changes in the results of the second quarter and signals a significantly improved outlook for profitability.

Susanne Eickermann-Riepe FRICS, Senior Vice President (SVP) of RICS worldwide: "The global Construction Index is rising, confirming the current market dynamics. Sentiment in the construction industry is rising in most regions worldwide. In Europe, Germany remains the leader, but Italy is also returning to positive territory and France is less negative. The 12-month outlook is clearly positive in all sectors and expectations have increased in commercial and residential construction in the current quarter. However, the top performer remains the infrastructure sector. Material costs remain the most frequently mentioned problem, but labor and skilled labor shortages are coming to the fore. The 12-month cost forecasts have risen, especially in commercial and residential construction. Infrastructure remains stable at the top. Employment expectations improved and profit margins are also assessed much more positively. A good signal for a significantly improved outlook in 2026."