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G&T Team
ResearchResearch Reports Construction Materials and Home Improvement Sector in Georgia

Construction Materials and Home Improvement Sector in Georgia

Executive summary

We estimate market size of construction materials and home improvement sector at US$ 3.4bn in 2021, posting CAGR of 5.2% over 2017-21 (+12.0% in GEL). Out of this, construction materials market size is US$1.3bn and home improvement sector size is US$ 2.1bn. 

Local production meets large portion of demand in construction materials sector (e.g. cement, concrete, re-bar, steel and other products, which are generally produced within the country due to its high transportation costs). Meanwhile, local production of renovation materials and furniture & lighting remains limited, despite positive developments of recent years. 

Before suffering due to COVID-19 pandemic-driven crisis in 2020, the construction materials and home improvement sector had experienced a favorable environment - receiving boost from solid public infrastructure spending, tourism boom and related hotel expansion activity, strong residential construction fundamentals and real estate being most attractive investments. The construction material and home improvement sector rebounded quickly in 2021, boosted by reopening of the economy and pent-up demand, as well as increased consumer preferences for comfortable housing. Continued strong economic growth and rent market demand spike further supported the sector in 2022 despite high interest rate environment and high prices. 

In coming years, we expect construction materials and home improvement sector to continue robust growth aided by solid public infrastructure pipeline, strong fundamentals in residential construction as well as boost from migration and revived hospitality investments. We believe that the key risks to our forecasts are: 1) longer than expected period of high interest rates environment and high inflation, 2) sudden reversal in migration trends and 3) geopolitical conflicts. 

Our key conclusions are as follows: 

Solid growth profile: Our analysis reveals that sector is facing strong residential, non-residential and infrastructure construction spending, resulting in a 5-10% annual growth in the next 5 years, which is in line with previous 5-year growth profile. 

Infrastructure pipeline remains solid: Public infrastructure investments are planned at 7.0% of GDP over 2023-26, down from c. 8.0% in previous 5 years, but it is still solid by global and regional standards. This slowdown is mostly explained by completion stage of East-West Highway project, but we expect other new large scale programs to commence (roads, critical municipal infrastructure), which are not currently reflected in medium-term budget framework.

Residential and non-residential fundamentals remain healthy: The main drivers of residential construction are healthy demand driven by urbanisation, household formation and housing renewal trends, combined with additional boost from migration impact. Non-residential construction expected to receive boost from general economic development creating demand for new construction formats (e.g. trade centers, logistics facilities, business centers, HPPs, etc.). 

Georgian companies enjoy higher profitability compared to many European and Asian peers indicating room for competition. Notably, many companies started to expand operations shifting to DIY retail formats.

Construction materials suppliers benefit from growing construction, but generally face volatile demand because of dependence on large infrastructure projects. 

Home improvement product suppliers generally outperform other sub-sectors as they are flexible on changing demand dynamics by building inventories and cutting imports.

Report methodology 

In this report, we analyze the construction materials and home improvement sector, which depends on residential, non-residential and infrastructure construction. We focus on both the heavyside and ligthside construction materials, household appliance and furniture & lighting using official statistics as well as in-house analysis and estimations. 

Key numbers in this report: 
•    US$ 3.4bn construction materials and home improvement market covered. 
•    Focusing on 4 key sub-sectors: construction materials, renovation materials, household appliances, and furniture & lighting. 
•    Analysis covers 20,000 companies involved in 35 production and 19 trade activities of construction materials and home improvement products. 
•    External trade analysis covers 900 products, which we identified relevant for construction materials and home improvement sector analysis. 
•    Audited financial statements of over 70 medium and large-sized companies analyzed in detail. We compared Georgian companies’ financial performance with over 400 companies operating in Europe and Asia.