As of: January 29, 2024, 7:06 p.m
By: Amy Walker
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The construction industry is in an unprecedented crisis.
The head of the construction department at BayWa explains how this could happen - and why he is still hopeful.
Berlin/Munich – The construction industry has had a difficult year.
While orders have plummeted, construction prices remain extremely high and the real estate market is stagnating.
Germany is in a recession that is likely to continue in 2024.
The construction industry was doing so well recently.
Maybe not as much was built as politicians would have liked - but things always moved forward.
Now the break-in and no end in sight.
Steffen Mechter is someone who has been working in and around construction for decades.
The trained bricklayer is now the head of the construction division at BayWa, Germany's largest agricultural and building materials trading company.
In an interview with
Ippen.Media,
he talks about the origins of the crisis, what hope he has for the future - and why we in Germany finally have to talk about the fair distribution of living space.
BayWa boss Mechter: “We have not experienced a crisis like this in the last 50 years”
Mr. Mechter, you have been working in various positions in the construction industry for 25 years, and now you are experiencing this crisis. What makes this crisis so different?
We have not experienced such a crisis in terms of both dynamism and depth in the last 50 years.
We also had deep crises with the financial crisis, but that was over relatively quickly.
Construction prices are currently at a level that we haven't had before.
The biggest boom of the last 50 years is now followed by the sharpest crisis of the last 50 years, within a period of 12 months.
In my opinion, this crisis is also the first construction crisis that will lead to changes in the structures of the industry.
The last crises have all reactivated the industry as it was before.
So are you actually getting something good out of this construction crisis?
Yes, I think that seems to be an essential characteristic of us humans.
The crisis has to be big enough and long enough for us to really fundamentally question our procedures.
This releases maximum innovative power.
I wish it worked differently.
But I actually have to confirm that there is currently a lot of willingness in the industry to question ourselves and pursue innovative approaches.
What would such new approaches be? How does the construction industry need to change?
I'm sometimes a bit critical of us, there's still room for improvement.
I'm proud of how we build.
I think regional value creation and craftsmanship are great.
But there is one thing the industry has not done compared to other industries.
We have hardly increased our productivity at all in recent years.
We do have a few product innovations here and there, for example better insulation materials and bricks, but the way we build is still very fragmented.
It is this fragmentation, not the people in the industry, that inhibits innovation.
There are a lot of companies working in our industry, and association work is also structured on a small scale and there is little standardization.
That's why we build the way we build and don't really get out of it.
So do you think that there are too many actors who are making different adjustments and not coordinating?
Yes, but please don’t misunderstand that.
The observation is not directed at the behavior of the individual, but rather at the structures.
I'll give you an example: When I learned to be a bricklayer 25 years ago, I always tried so hard to get the wall completely straight until my polisher said to me: You don't need to be that precise now, the plasterer will fix it when the wall is then plastered.
And unfortunately it often goes on every step of the construction process - hardly anyone looks at how they could make things easier for the other person at the end of the chain.
So that means: We are not socialized in our industry to think in terms of continuous process chains.
Other industries have long been working in so-called end-to-end processes.
Today we plan every building again and again.
This is all very poorly integrated into the system.
We have a lot of process breaks and that leads to what you said;
you don't coordinate in an integrative way.
And this runs through the industry in different variations.
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Cranes and scaffolding are on the construction site of an apartment building.
© Bernd Wüstneck/dpa-Zentralbild/dpa/Symbolbild
So there are a few things the construction industry itself could do to help itself. But are the political framework conditions right for this?
Even if the construction industry has its share, politicians are largely responsible for the crisis.
Politics has no influence on the development of interest rates, definitely not.
But politics does have a great deal of influence on financial conditions.
On tax incentives, on subsidies that are canceled from one day to the next.
Investors are currently scared, that's because of politics.
That won't change anytime soon, even if interest rates fall again.
We are now too deep in crisis for that.
It will not be enough for interest rates to fall and politicians to finally act sensibly.
We will all have to do our part.
What’s more, the challenges of the future are enormous. We have to build more, build faster - and also in a climate-friendly way. Is all of this even possible?
Yes, if we don't set the goals too strictly.
Today we can actually build more sustainably and therefore be more economical.
An example: If you build the outside walls of a house in solid wood and the ceilings in reinforced concrete, then that is much better than building everything in reinforced concrete.
Now you would correctly say: reinforced concrete ceiling, there is cement in it, very harmful to the climate.
But we must not be too strict in these areas.
A big lever for the climate treasure is renovation. We would actually have to renovate millions of buildings in Germany in order to achieve our climate goals. How can we tackle this issue on a large scale?
This is difficult because the buildings are far too individual to really be renovated serially, for example.
I see a lot of small approaches, but not the high productivity levers like in new buildings.
To be honest, if we talk about what is holding back large-scale building renovations in Germany, then it is primarily the very high rent share.
It is incredibly difficult to carry out extensive energy renovations in apartment buildings because they would have to be empty to do so.
This brings us to the next problem, the rental market. Rents are skyrocketing and no one dares to leave their living space for fear of having to pay even more in the end. How do we get this under control? Just about building more?
If you look at the statistics on the need for living space in Germany, the need for living space per capita has increased in recent years.
There are two reasons.
On the one hand, the proportion of single households has increased, particularly in large cities.
Of course, that brings up the balance.
And more and more older people are living in single-family homes.
And that is - I say this without any reproach - a problem.
An older couple who lives in a house will usually never do a complete renovation, never do an energy-efficient renovation to the highest level.
It's important to me to say: I'm not calling for older people to leave their homes, but that needs to be addressed too.
Ultimately, there is living space that can be renovated and a young family would probably do it.
In order to solve the problem, we need more new apartment buildings in rural areas.
Because one thing is not possible: I cannot say to the older residents on the outskirts of cities or in the countryside: Please get out of your houses, sell them to young families and then go into an apartment - which we don't even have.
That's why rural areas need more apartment buildings so that they can trigger these chains of relocation.
And that's where we need to take action.
Steffen Mechter is the head of BayWa's construction division © BayWa
This is a difficult, very sensitive topic.
Yes, we Germans may not be so good at it, but we should be able to talk about it openly.
In this respect, a public discourse would certainly be desirable.
Let's talk as a society about how we want to deal with the piece of earth we have.
In the end, even real estate prices would probably fall if many people put their renovation properties on the market.
Lots of offer, lower price.
So we always come to the same point: we're stuck in several places. How long do you think this will go on?
Ever since Ms. Lagarde
(Christine Lagarde, Chairwoman of the European Central Bank, editor's note)
said in Davos that there would be no interest rate turnaround until summer at the earliest, I have been very skeptical about this year.
My hope is that we can get through the crisis without a major wave of bankruptcies.
If the crisis extends well into 2025, we will probably have damage, some of which will no longer be repairable.
So the industry can't take this much longer.