Energy renovations and public projects to outperform…

…reduced activity in private construction returns in ‘21e

Speeding up a process MTHH was prepared for

Construction activity levels to return in 2021
Today we held a conference call with Bo Sandberg, the chief economist of the Danish employer’s association for the construction and civil works sector, “Dansk Byggeri”. The key conclusion of the call was this: after seven years of expansion, COVID-19 lockdowns will likely turn a soft landing into a somewhat harder landing for 2020 than previously anticipated, although the organisation is optimistic. Private and commercial construction are challenged, but housing seems to be quite resilient with house prices only expected to fall ~2% in 2020. Transaction activity will remain high, especially for vacation homes. Public assignments are quite unaffected, as there are many assignment both due to the suspension of municipal expenditure ceilings and in public housing energy renovations (with DKK 18bn in investments, financed by the Landsbyggefonden). There appears to be no reason to fear overheating in construction and the organisation believes that consolidations are in order, with excessive competition and low pricing power during the upcycle. Energy renovations of domestic building stock is still central to climate goals, which is expected to continue, but likely not heavily supported by EU renovation initiatives. As a result, the organisation believes that we will see a ‘V-shaped’ curve in the Danish construction sector with GDP falling 5.3% in 2020 and positive 4% in 2021. As a result construction activity level would normalise in 2021.

MTHH was already changing its setup for the situation
We estimate that 85% of MTHH’s revenue is construction (vs. civil works) and 40% is non-housing (incl. hospitals, offices, renovation and infrastructure). Within housing, a large share is renovation assignments. Even before COVID-19, MTHH highlighted that we would see a decline in commercial and housing projects in the industry, and thus already began transforming its structure aligned with its ‘sustainable >
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