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DENMARK: An Introduction to Real Estate: Construction

Contributors:

Jeppe Reipurth

Kristian Boisen Andersen

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The Danish Construction Industry at a Glance – 2025

In these early days of 2025, the Danish construction industry shows promising signs of renewed momentum following a period of financial instability caused by higher interest rates and inflation. The overall outlook for the industry is optimistic, driven by increased investments in energy projects, major infrastructure projects and climate-related initiatives.

Another key driver of this positive trend is the resurgence of housing projects, following a challenging period of high financing costs. Accordingly, such a recovery is expected to contribute to the positive tendencies in the industry.

After a couple of years of declining activity, 2025 is thus expected to witness an upswing in new construction projects on a general basis, according to the Danish Association of Construction Clients (Bygherreforeningen). This anticipated increase in activity will likely generate positive ripple effects throughout the entire supply chain.

However, 2025 is not expected to be entirely uncomplicated for the industry. Challenges such as a high level of disputes, labour shortages, budget overruns and compliance are expected to continue to impact the sector.

Overall, while 2025 indicates substantial promise and renewed momentum for the Danish construction industry, careful navigation of ongoing challenges will still be essential.

Main Trends

Blooming activity in energy and infrastructure projects

According to the Danish Association of Construction Clients (Bygherreforeningen), the outlook for the Danish construction sector in 2025 is positive. Growth in the number of new construction projects is especially expected east of the Great Belt, driven by investments in energy and infrastructure projects as well as housing, industrial and commercial projects. This positive outlook reflects a continuation of trends observed in 2024, with energy and infrastructure-related projects playing an essential role.

Key contributors to this expected development are the green transition in Denmark and the necessity for climate-related initiatives due to global warming and climate changes. Similarly to 2024, among the major construction initiatives planned for 2025 are Power-to-X facilities, large-scale solar parks and cloudburst tunnels. As a result, the market presents opportunities for various stakeholders, including developers, contractors, technical consultants and suppliers of specialised equipment.

From a legal perspective, energy and infrastructure-related construction projects are especially interesting. The complex nature of these projects often demands special attention to the contractual framework, as the involvement of specialised suppliers and consultants, public authorities, international and national investors, as well as other stakeholders, further complicates the legal landscape. This complexity might require a tailored contractual framework that – in some cases – goes beyond traditional Danish construction law contracts.

A primary legal complexity involves the allocation of risk and responsibilities among the parties involved. Therefore, careful attention must be given to the contractual set-up, especially concerning provisions related to interfaces and co-ordination, risk allocation and scope of work. In energy-related projects, local laws and regulations as well as pricing mechanisms will also demand careful attention.

Given the potential for significant financial losses stemming from defects or delays, defining how risks and liabilities are distributed among project stakeholders is crucial.

Increase in housing project investments

In the aftermath of challenging times, investments in housing projects are expected to rise again, driven by lower financing costs following decreased interest rates. The Danish prognosis centre (Prognosecenteret) indicates that a substantial pool of housing projects has accumulated, leading to a “ketchup effect”, expected in 2025.

Growth in housing projects might positively affect the Danish construction industry. Many stakeholders in the industry will likely benefit from this development. However, housing investment growth is expected to particularly benefit Copenhagen and its surrounding areas. It is expected that the markets in Zealand will be the driving force, whereas areas around Aarhus and other cities west of the Great Belt are expected to see less activity in 2025.

Other Notable Industry Markers From a Legal Perspective

Strengthening of working environment regulation

In connection with 2024’s legislative programme, the Danish Parliament (Folketinget) introduced new regulation affecting the Danish construction industry, focusing on the working environment.

On 11 June 2024, the Danish Parliament adopted an amendment to the Danish Working Environment Act. Following this amendment, the Danish Working Environment Authority adopted an executive order establishing stricter requirements regarding asbestos work.

A key component of the new regulation, effective from 1 January 2025, mandates that companies must obtain authorisation to perform demolition work involving asbestos-containing materials. Generally, individuals and unauthorised companies are prohibited from undertaking such work, with limited exceptions for minor, short-term demolition tasks.

Further expanding the authority of the Danish Working Environment Authority, on 18 December 2024, the Danish Parliament proposed a new act empowering the Authority to stop contractors’ and subcontractors’ work in cases of non-compliance. Once in force (expected from 1 July 2025), the Authority will have the power to stop work on construction sites where violations persist despite repeated warnings, orders and fines.

These regulatory changes introduce new compliance requirements for the Danish construction industry. Some companies in the industry will likely need to assess potential impacts, including delays and additional costs, associated with the implementation of these stricter regulations. A critical legal question arises: who bears the risk and assumes liability for such delays and costs?

High level of disputes

The construction industry continues to face a significant number of disputes, despite the optimistic trends anticipated for the sector. While there are positive signs of growth and development, various challenges persist, contributing to a high level of conflicts among stakeholders.

According to the Danish Association of Construction Clients (Bygherreforeningen), the owners/clients of building and construction projects expect challenges on the quality of performed works, design, documentation, budget overruns, public administration, bankruptcies, etc.

It is not unlikely that 2025 will also be characterised by a significant number of disputes in the Danish construction industry. Companies in the industry should therefore consider the level of conflicts and the associated risks. Dispute resolution processes can be financially demanding, so considering the potential benefits of negotiation or alternative dispute resolution procedures may be wise in some cases.

Innovation in construction materials and construction supplies

As a consequence of the green transition in the industry, shifting climate patterns and the growing demand for more durability and sustainability in construction materials, suppliers of building products continue to innovate and think differently.

Numerous new building materials have already been introduced, and many more are likely to emerge in line with stricter CO2 emission limits related to building and construction projects.

From a legal perspective, the introduction of new building materials, methods and designs – essentially, anything new – inevitably raises complex legal questions regarding liability for their use or the new contexts in which they are applied.