Translation: Original published in Finnish on 10/08/2026 at 08:56 am EEST

The Confederation of Finnish Construction Industries RT published its semi-annual economic review. In the review, estimates for next year were raised, particularly regarding non-residential and infrastructure construction. On the other hand, in RT's estimates, the volume of residential construction remains very low, the development of non-residential construction, excluding data centers, is subdued, and the turnaround in renovation continues to progress slowly. Compared to the spring review, the main driver of the estimate revisions is, as expected, data center construction, which will provide a much-needed boost to Finland's economy and construction sector in the coming years.

Residential construction remains at rock bottom, renovation construction recovers sluggishly

RT estimates that construction volumes will grow by 2% this year and growth will accelerate to 4% next year. The strongest growth during the forecast period is related to business premises and infrastructure construction, as residential construction volumes remain at a low level, and renovation construction will slowly return to growth.

In residential construction, the situation has not changed significantly since the spring. RT expects residential construction to decrease by 4% this year (previously 3%) and further by 1% next year. RT expects the number of housing starts for the current year to remain at 15,000 units, whereas the starts for next year were moderately revised upward to 16,000 units (previously 15,500 units). Within residential construction, RT's estimate for market-driven housing construction starts decreased by 900 apartments for 2026 and by 500 apartments for 2027. This year's estimate was depressed by unsubsidized apartment buildings (400 apartments) and terraced houses (500 apartments), and next year's estimate by terraced houses (400 apartments) and detached houses (100 apartments). It was replaced by subsidized production and housing for special groups. Relatively speaking, very strong growth is still expected in unsubsidized, block of flats starts for next year, with RT expecting starts to grow to 5,500 apartments from 3,000 apartments this year. Generally, the weakness in residential construction is still driven by familiar factors. Demand continues to be weakened by, among other things, falling prices and rents for existing homes, the employment situation, consumer confidence, rising construction costs, and the high interest rate environment. Investor demand in particular has plummeted to an exceptionally low level, which is also reflected in investor volumes of residential constructors on the stock exchange (at the end of Q2/26, YIT had 105 investor apartments under construction, SRV 96).

Estimates for renovation construction also remained roughly unchanged compared to the spring market review. RT expects a 0.5% growth for renovation construction for this year, despite a higher starting level than previously estimated. For 2027, growth is estimated to be at 1% (previously 0.5%). In renovation construction, the structure of growth is weighted toward small-scale projects for now. According to the review, major renovations are being postponed or implemented on a smaller scale, while hardware store sales point to a turnaround in minor repairs. Therefore, we do not expect professional renovation construction to provide significant traction for companies like Consti in the near future. The renovation of non-residential buildings has dropped by around a fifth from its peak, and the renovation of residential buildings by around a tenth. The recovery of non-residential renovations is tied to the recovery of the real estate sector, and public sector renovations will remain at a moderate level, according to the review.

All building permits and building permits excl. transportation buildings (data centers), 1995–2026, m3 rolling annual total

Source: Statistics Finland

Brave new world boosts construction of commercial premises and infrastructure in Finland

The most significant changes in the review were seen in the outlook and estimates for infrastructure and non-residential construction. Non-residential construction is now expected to grow by 5% for the current year and 9% for next year. Similarly, infrastructure construction is expected to grow by 4% annually in 2026-2027. It is worth noting that in infrastructure and non-residential buildings, the baseline levels for 2025 were also revised upwards, driven particularly by statistical revisions in infrastructure construction. RT raised its expectations, particularly regarding the starting cubic volumes of commercial and office buildings for 2026-2027. The estimate changes stem from data center construction, where the project pipeline has grown rapidly recently. In infrastructure construction, data centers are visible as foundation and earthwork projects as well as electricity grid investments, but demand is on a broader base than non-residential premises. Growth is also supported by energy projects, rail projects, and investments related to security of supply and defense.

Regarding data center construction, RT estimates the market potential based on the project pipeline statistics maintained by the Confederation of Finnish Industries EK. In its own calculations, RT used a share of 15-35% for construction in the data center investment (excl. equipment). Based on these assumptions, the potential for construction in RT's calculations cumulatively settles at 8-19 BEUR by 2035, while data center investments of around 55 BEUR have been identified in the project pipeline. This would mean annual construction investments of around 1-2 BEUR Meanwhile, Finland's largest construction company, YIT estimated in its September capital markets review that the Finnish data center market will bring investments of 13-15 BEUR to builders in 2026-2029, which corresponds to an average annual market of around 3-4 BEUR. Similarily, we previous estimated the annual market size for 2026-2030 to be around 1-2.5 billion.. In our view, the dispersion of estimates well reflects the unpredictable and rapidly changing nature of the market. In addition, we believe that, for example, the treatment of equipment procurement explains part of the differences between the estimates (e.g., electrical equipment and cooling systems purchased by the client themselves are excluded from the contractors' market). Based on the above estimates, we believe that the annual market for data center construction will settle between 1 and 4 BEUR in the coming years, in light of current information. This would correspond to 3-12% of Finland's construction market of around 34 BEUR (2025), so we estimate the significance of data centers for the overall market to be substantial. We maintain our view, however, that data center construction, at least with the current project pipeline, will not be sufficient to fill the gap of around 5 BEUR in the market caused by the contraction of residential construction in 2022-2025.

The construction market in Finland (BEUR)

*Inderes' estimate of the potential outcome range

Source: RT, YIT, FDCA, JLL, Inderes

Source: RT

We believe the RT review reinforces the picture of the deepening duality in the Finnish construction market, which has been visible in the performance of the companies we cover for some time. Infrastructure builders and companies benefiting from data center construction have performed well, whereas the development of companies focusing on other construction has been clearly more subdued. In light of the estimates in the review, we estimate the situation to continue in the coming years as well. We also believe that the investments in energy, transmission grids, electrical infrastructure, industry, and defense highlighted in the review will benefit several of the companies we cover in the coming years.

In our estimates, YIT’s earnings growth relies increasingly clearly on contracting and the Housing CEE segment, as the turnaround in Finnish housing construction moves further away. RT’s review was well in line with this situation picture. In the third quarter, in addition to a contracting project, the company launched only two small developer-contracted residential projects in Finland. In the first half of the year, it started construction on only 64 consumer apartments in Finland, and at the end of June, it had only 105 investor apartments under construction. YIT does not rely on a recovery in the domestic housing market during its current strategy period, and in our estimates as well, the turnaround in the Housing Finland segment is timed closer to the end of the decade. As a counterweight, data center construction has emerged as a key growth driver for the company. YIT is currently building five data centers, and in July it won a data center contract worth around 300 MEUR (atNorth), which we expect to be clearly visible already in the figures for the end of the year. The company is targeting revenue of around one billion euros from data center construction by 2029 (Q2/26 LTM revenue from data center construction 201 MEUR). Driven by an increasingly brighetr outlook, the company doubled its strategy period growth target to an annual growth of at least 10%. The target for the Construction segment was raised to at least 6% (previously 4%) and for the Infra segment to at least 15% (previously 10%). We now expect the comapny's revenue to grow by around 9% (previously 7%) in the current strategy period. Our estimates thus fall slightly below the lower end of YIT's growth target, but receive clear support from data center construction.

SRV’s current project portfolio highlights public alliance projects (especially hospitals) and data centers, which align well with the market picture painted by RT’s economic review. We estimate that hospital projects and data centers will make up a clear majority of the company's order backlog at the end of Q3'26. In our estimates, the company's revenue will turn to clear growth this year, driven by commercial construction. In our estimates, the earnings growth in the remainder of the year is explained above all by the Lahti data center contract of around 270 MEUR, the revenue recognition of which will accelerate in the second half of the year according to our assessment. The importance of data centers has rapidly grown to be significant for the company, which is underscored by the dedicated business area established at the beginning of October. The company currently has only two data center projects under construction, although we believe that the project pipeline is strong, as a dedicated business area and management team position would hardly be established based on just the current two projects. As with YIT, residential construction volumes are growing slowly in our estimates, and we expect more significant support from the segment only from 2028 onwards. For 2027, we predict very strong revenue growth of 17% for the company and an improvement in profitability as the focus in non-residential construction shifts toward higher-margin projects However, the weight of individual high-risk large contracts is increasing in earnings, meaning that problems in a single project would reflect on the entire group's result more strongly than before.

Kreate's year has progressed clearly stronger than we expected, and in September the company raised its guidance for the third time this year. Growth is supported by the SRV Infra acquisition and the consolidation of KFS Finland from the beginning of April, but we estimate that the majority of H2 growth is organic. Organic growth is driven by the record-strong order book, which stood at 886 MEUR at the end of June. In addition to data center projects, it has been driven by defense projects as well as traditional transport infrastructure projects and railway construction. Kreate is involved in several ongoing data center projects, and its work focuses on the early stages of these projects, which allows it to benefit from investments earlier than building constructors. The company estimates that the market situation for infrastructure construction is stronger than normal in both Finland and Sweden. RT's review also supports this picture, as RT raised its growth estimate for infrastructure construction this year to 4% (spring estimate 2%) and expects the same growth rate to continue next year. According to RT, demand is also expanding to areas such as energy and security, which aligns well with the drivers of Kreate's order book. We estimate revenue of 685 MEUR for this year and growth of around 8% for next year, as we believe the company will also enter 2027 with a significantly stronger order backlog than in the comparison period. Following this year's step change, the clearest risk factor in our opinion is the continuity of the earnings level, as the growing weight of data centers ties earnings development more tightly than before to the progress of individual large projects and the continuation of the investment cycle.

GRK’s earnings have also grown this year, thanks to exceptionally strong profitability, even though revenue still declined in the first half of the year in Sweden due to lower volumes in the Stegra project. We now expect the company's revenue to grow by around 8% this year, whereas as recently as in the spring we expected a decline of a similar magnitude. The change was driven by the KSBR acquisition completed in the summer and a strong order intake, which raised the order book to a record 1,170 MEUR (+48% y-o-y) at the end of June. The company expects about half of the order book to be recognized as revenue during the remainder of the year and slightly over 400 MEUR next year, which also provides good visibility into the future. Data center projects have become an increasingly important demand driver for the company. GRK announced an earthworks contract for a data center area worth 66 MEUR in August, and in September, KSBR was selected for a new data center project. In addition to data centers, we see the future investments highlighted in RT's economic review – such as in energy, transmission networks, and electrical infrastructure – as interesting for the company. KSBR is Finland's leading builder of renewable energy and would thus benefit from, for example, a recovery in wind power investments. We believe that there are currently around 2,000 wind turbines in operation in Finland. KSBR states that it has implemented 38 wind farms and 500 wind turbines, meaning the company's market share of construction has been around a quarter. Further, we estimate that GRK's Power business will benefit from the investment wave, as the business is relatively recent and therefore still small in scale.

Consti’s demand is built on renovation and building services for housing companies, corporations, and the public sector. The importance of large public projects in the company's project portfolio has continued to grow, which was reflected in the order book of 320 MEUR at the end of June (+16% y-o-y, of which the renovation of the Government Palace block accounts for approx. 112 MEUR). RT's fall review supports this picture, as public sector renovations are expected to remain at a moderate level and commercial renovations are expected to increase only as the real estate sector recovers. Overall, however, the turnaround is slow, as RT kept its growth estimate for renovation construction this year at 0.5% and expects 1.0% growth for next year. Growth next year will be driven by the renovation support package agreed upon in the spring government budget session, which includes a temporary renovation grant targeted at housing companies. On the flip side, according to RT, rising housing expenses and interest rates are weakening housing companies' capacity for major repairs, and renovations are being postponed or implemented on a smaller scale, which is in line with Consti's subdued order intake in Q2 and the continued tight competition Further, according to RT, recovery will first be seen in smaller repairs, so in professional renovation construction, which is essential for Consti, the turnaround will proceed more slowly than the overall market in our assessment. In addition, we believe that the exceptionally weak state of residential construction will increase competition in renovation.

Tekova's growth beat our expectations in H1 despite a strong comparison period. RT expects 5% growth for non-residential construction this year and 9% growth next year, but the growth is still on a narrow footing and relies practically entirely on data center construction. This can also be seen in the permit development graph above. RT expects the housing starts for industrial and warehouse buildings to pick up only next year. Tekova announced its Q3 order intake, which fell clearly short of our expectations. We believe this is partly due to the timing of project starts, but the figure also reflects the still tight market situation in non-residential construction. Tekova does not currently build data centers, and we estimate that the majority of the projects are size-wise outside the company's comfort zone. RT estimates that data center projects that have received an investment decision will account for around 7 BEUR of construction (probable realization), meaning that projects fitting the company's size scale can still be found in the project flow, and even a single data center order would be a clear upside risk to our estimates.

Honkarakenne issued a profit warning in August, as the beginning of the year fell clearly short of our expectations. H1 revenue decreased by around 5% as export project deliveries were postponed to the end of the year. Domestic revenue decreased by 4%, reflecting the still sluggish market for detached house construction. RT expects detached house construction starts to remain at last year's level of around 3,800 houses this year and to grow to 4,400 houses next year, whereas it expects leisure construction to remain unchanged. Therefore, in RT's estimates as well, tailwinds from the domestic market are expected no earlier than next year. On the positive side, the order book at the end of June was 34 MEUR, which is 28% higher than the comparison period and at its highest level since 2022. The order backlog was boosted by an order received in June for over a hundred log buildings to Western Europe. We believe that the order book will drive a clear turnaround in revenue growth and profitability in H2. For the full year, we expect revenue to grow by around 9% and adjusted EBIT to post a loss of around 1 MEUR. We expect the most significant earnings improvement to take place in 2027-2028, supported by low baseline levels, a gradual market recovery, and investments in exports.

LapWall’s growth in the coming years will be built on hall, commercial and industrial construction, public construction, and data centers, which was reflected in the near-record order backlog of 25.4 MEUR at the end of June (+26% y-o-y). RT's fall review supports this picture, as the number of commercial and office building starts is expected to grow sharply, driven by data centers (cubic volume growth of over 80% in 2025-2027). RT also estimates starts of public service buildings to grow by around 12% this year. As a downside, RT clearly lowered its start estimate for industrial and warehouse buildings for the current year, which corresponds to the concern we raised in our recently published comprehensive report regarding the sluggish permit statistics for industrial construction outside of data centers. From the data centers, LapWall has won two roof deliveries for YIT's Kajaani projects, and we expect data center deliveries for 2027. RT estimates that the data center projects that have received investment decisions will allocate around 7 BEUR to construction, and the market size is, thus, not a limiting factor on LapWall's scale. We do not expect any support from detached house construction before 2028. The strong recovery in terraced house starts for 2027 expected by RT would, if realized, be an upside rather than downside risk to our estimates through the Kastelli framework agreement. We forecast revenue to grow by 17% this year, which is in line with the company's guidance. Data center construction is an essential driver for the 15% growth we forecast for next year, and RT's review does not put pressure on LapWall's estimates.

EcoUp’s Insulation business demand relies on detached house new construction in Finland, and we estimate that the share of renovation and other construction in revenue is around 40%. In its fall review, RT lowered its estimate for detached house construction (detached and terraced houses) starts for the current year to a 4% decrease, whereas the spring review still expected growth of around 10%. The decline is primarily explained by terraced house construction starts, which are expected to decrease by around 10% this year. For 2027, RT still expects growth of around 25%, but from a lower level. At the same time, the 2025 outcome for detached house construction starts was revised significantly upwards (5,423 units, +16% from 2024). Because insulation follows construction starts with a lag of several months, last year's growth will continue to support EcoUp's volumes this year, but the decline in this year's starts weighs on the outlook for 2027. Thus, the turnaround forecast by RT would be fully reflected in EcoUp's figures only in 2028, on which our investment view also relies. We estimate organic growth of 5% for EcoUp's Insulation business this year and 10% next year. We lowered our estimates back in August based on Statistics Finland's weak residential housing figures, and RT's fall forecast is in line with the revisions we made at that time. Next year's growth estimate relies on price increases driven by cost inflation, the growth of the Swedish subsidiary, and the start of a turnaround in housing starts in the early part of 2027, with the latter carrying downside risk due to the delay in starts. In renovation construction, RT expects slightly faster growth only for 2027, supported by the support package from the spring spending limits discussion, which is a mild tailwind for EcoUp.

Toivo Group made a significant step up last year after weaker years, as the volume of the company's business almost doubled to around 80 MEUR year-on-year from the low level of the comparison period, and EBIT rose to around 8 MEUR. The business volume includes revenue and projects made directly to the balance sheet. However, the company has shifted more clearly toward off-balance-sheet projects, which is why revenue is once again a good metric for the company. This year, we expect revenue to increase to 81 MEUR (2025: 62 MEUR) and EBIT to be 7.7 MEUR, which is of around last year's level. Reflecting RT's review, housing starts will remain below 20,000 apartments next year for the fifth consecutive year, but the turnaround will likely begin in the Helsinki Metropolitan Area, where Toivo's project portfolio is strongly concentrated. Toivo has been able to swim against the current in the current market, as demonstrated by the strong project startups of around 60 MEUR in Q2. The company has been able to launch carefully selected owner-occupied housing projects, projects tailored for investors, and social real estate projects. For example, 32 out of 34 apartments in the Gemma project in Kalasatama, Helsinki, were reserved immediately. In RT's estimates, ARA starts are expected to halve next year to 3,000 apartments, which creates a headwind for Toivo, but the significance of this for the company as a whole is already relatively small. Backed by already initiated projects, we estimate next year to be a good one, and we forecast EBIT to rise to around 10 MEUR. From here on, our growth estimates rely on a gradually improving market situation, for which the economic turnaround provides the conditions, but rising interest rates and weak employment keep the risk level high. However, we estimate that growth from the current revenue level will be difficult unless the new-build housing market turns to a gradual upward trend in the coming years.