Building & Construction: Renovation over New Build

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Building & Construction: Renovation over New Build

FoundationM

Executive Summary

Since 1992, Europe’s new-build market has delivered limited growth with higher volatility,

while renovation and maintenance market have steadily expanded. We expect this

divergence - and the superior risk/reward profile - to persist and accelerate.

Exhibit 1: Historical renovation spend exhibits stronger growth and less volatility for

the renovation market

New-build New-build

EU Real Spending R&M CAGR R&M StDev

CAGR StDev

Lead-up to GFC (pre-2008) 1.5% 1.9% 6.9% 1.2%

Global Financial Crisis (19.2%) (1.9%) 12.9% 2.5%

Post-GFC recovery (pre-COVID) 1.2% 0.8% 6.1% 1.7%

COVID period 2.9% 2.9% 3.4% 7.8%

Post-COVID (through latest) (1.8%) 0.8% 6.8% 3.0%

Full period (1992–2026) (0.3%) 1.2% 8.1% 2.4%

Source: EuroConstruct, Morgan Stanley Research

New residential spend has historically tracked household formation and population

growth. UN projections indicate population decline in Germany and Italy, alongside a

marked slowdown in France and the UK through 2050. We expect weak household

formation to translate into a soft new-build market.

Exhibit 2: UN Population projections suggest flat household growth in Europe to 2050

CAGR

EUR Households Outlook 2025 2050 % Change

2025–50

UK 29,003 30,879 6.5% 0.25%

Germany 41,126 39,325 (4.4%) -0.18%

France 31,144 33,334 7.0% 0.27%

Italy 26,669 24,976 (6.3%) -0.26%

Aggregate 127,942 128,514 0.4% 0.0%

Mean of country CAGRs 0.0%

Source: United Nations Department of Economic and Social Affairs, Morgan Stanley Research Estimates, 3-year smoothed datasets

Exhibit 3: Negative UN population growth projections in Germany suggests negligible

new-build demand

Germany - Housing Completions Outlook

Household Formations Implied Household Formations Housing Completions

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