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House in Hesse undergoing renovation
Something significant has shifted in Germany's construction industry, largely without being planned. For the first time, the data suggests that renovation, conversion and repurposing of existing buildings are on the verge of overtaking new-build as the dominant form of construction activity in the country.
The clearest evidence comes from the Greyfield Index 2026, compiled by the Greyfield Group, which tracks planning permissions and completions across both new-build and existing-building activity nationwide. The index currently stands at just under 80 points, up from 53 when it was first published two years ago. Around 44% of all construction activity in Germany now takes place within the existing building stock. In five federal states — Bremen, Hesse, North Rhine-Westphalia, Saarland and Thuringia — renovation activity already exceeds new-build. Greyfield founder Timm Sassen expects the crossover to occur nationally by 2028.
"The construction revolution is not taking place on greenfield sites, but within existing buildings," he says.
The shift has not been driven by policy. It has been driven by the collapse of new-build economics. Construction costs have risen by around 50% since 2019. Higher interest rates have undermined development viability, while lengthy planning procedures and increasingly demanding building standards continue to add cost and complexity. Faced with those economics, developers, housing companies and investors have increasingly turned towards the existing building stock.
The existing building becomes the opportunity
The opportunity is considerable. Around 60% of Germany's residential buildings pre-date the first Thermal Insulation Ordinance of 1977, while four-fifths were completed before the Energy Saving Ordinance came into force in 2002. Much of the country's housing stock therefore falls well short of today's energy standards.
Yet bringing these buildings up to modern standards does not necessarily require expensive, new-build levels of refurbishment. Upgrading buildings to energy efficiency classes B or C can significantly reduce energy consumption at comparatively modest cost. Lower operating costs improve lettability, modernisation surcharges provide scope for higher rental income, while refurbishment typically attracts valuation premiums on exit. At the same time, the embodied carbon of a refurbished building is estimated to be up to 50% lower than that of a comparable new build, strengthening the ESG investment case.
Institutional investors are increasingly reaching the same conclusion. According to a Knight Frank survey, 93% already incorporate ESG criteria into investment decisions, while more than three-quarters plan further portfolio modernisation. Christian Freundl of Deutsche Investment Kapitalverwaltung argues that refurbished residential portfolios are moving into sharper focus as new-build profitability weakens and ESG requirements become more demanding. Rather than competing directly with new-build, refurbishment is increasingly becoming an investment strategy in its own right.
This does not mean Germany's housing shortage has been solved — far from it. Germany's housing stock has grown by around 6% since 2015 — nearly four times faster than the population — yet a shortfall of approximately 1.4 million dwellings persists. Demand runs at around 320,000 units per year; completions are expected to reach only 200,000 this year. New-build remains indispensable if that gap is to narrow. But the centre of gravity within the construction industry is nevertheless shifting. Increasingly, the question is no longer whether existing buildings will become more important, but how much of Germany's future housing investment will take place within them.
Policy lags behind the market
Here, policy still lags behind reality. Sassen argues that Germany's funding programmes, planning procedures and building regulations remain largely geared towards greenfield development, reflecting assumptions that have shaped housing policy for decades. Supporting large-scale refurbishment, conversion and repurposing requires a different regulatory framework, one that is only beginning to emerge.
The market, however, is not waiting for policy to catch up. Economic conditions have already begun redirecting investment towards existing buildings. Germany's construction industry has quietly been reorganising itself around the existing building stock for several years, driven less by political strategy than by commercial necessity.
For decades, the health of Germany's housing sector has largely been measured by the number of new homes completed each year. That will remain an important benchmark. Increasingly, however, it tells only part of the story. The country's next phase of housing investment is likely to be measured just as much by what happens to the 44 million homes it already has.