Albania under construction 1995 – 2024

The construction sector in Albania has played a central role in the country’s economic and urban transformation over the past three decades, acting as both a driver of growth and a reflection of structural imbalances.

From the post-communist liberalization of the 1990s to the post-earthquake and pandemic rebound of the 2020s, construction activity has followed the contours of macroeconomic shifts, demographic change, and speculative investment patterns.

While contributing significantly to employment, infrastructure, and housing supply, the sector now faces critical challenges related to overconcentration, environmental degradation, and misaligned capital allocation. The phenomenon of excessive construction density, especially in urban hubs like Tirana has intensified spatial inequality and strained public services, raising urgent questions about sustainability, planning, and equitable development.

This analysis unpacks the evolution, structure, and consequences of Albania’s construction sector from 1995 to 2024, identifying key trends, distortions, and pathways for reform.

I. Strategic and economic significance of construction in Albania (1995–2024)

1. Economic driver & growth engine

• GDP Linkage: Construction consistently aligned with macroeconomic cycles—fueling growth in booms (2000–2007, 2017–2024) and absorbing shocks in downturns (2008–2013, 2020).
• Employment Generator: Labor-intensive sector, especially during expansion phases.
• Urban Transformation: Engine of urban renewal, housing expansion, and infrastructural development.

2. Five chronological phases of sector evolution

II. Structure of built spaces: housing vs economic activities

a. Residential construction

Total (1995–2024): 36.29 million m² (≈75% of permits)

Drivers: Urbanization, family fragmentation, diaspora investments.

Demographic Mismatch: Despite emigration and population decline, housing permits grew → surplus housing.

b. Economic construction

Total: 12.63 million m²

Links: Closely follows sectoral trends in tourism, logistics, light industry.

Underperformance: Compared to GDP growth from $1.2B (1995) → $25.5B (2024), the share of productive space remains limited.

III. Construction density and regional disparities

a. Geographic Concentration & urban density

Construction density crisis

• 51% of all permits and built area is concentrated in Tirana, Kamëz, and Vorë.
• High-rise proliferation and vertical expansion, often exceeding urban infrastructure capacity.
• Density far surpasses EU norms → leads to congestion, pollution, and reduced livability.

Environmental and urban stress

• Tirana emits 800,000 tons CO₂/year from construction.
• Urban heat islands, traffic saturation, and degraded public services.

b. Uneven development

• High Activity Zones: Tirana, Durrës, Vlora, Saranda, and coastal tourism belts.
• Lagging Regions: Kukës, Dibra, Elbasan highlands → face underinvestment and depopulation.
• Result: Structural spatial inequality driven by speculative rather than strategic urban growth.

IV. Environmental & Health externalities

1. Environmental costs

• Air and Water Pollution: €900M/year in health costs; 1.2M people exposed to PM2.5/PM10.
• CO₂ Emissions: Total national emissions from construction ~1.3 million tons/year.
• Biodiversity Loss: Urban sprawl impacts protected areas and farmland.

2. Health & Agricultural damage

V. Housing stock & Capital misallocation

1. Oversupply vs Demand

• Total stock: 72.6 million m² (built + under construction)
• Vacant units: 21.78 million m² (≈30%)
• Actual demand: ~11 million m² (from diaspora and foreign buyers)
• → Surplus: ~10.78 million m², indicating no need for mass new construction.

2. Locked Capital

• Massive capital (~€3–4B) locked in unsold speculative housing.
• Creates a non-productive economy, misallocating financial and human resources.

VI. Strategic outlook & Policy scenarios

Scenario Analysis

Recommendations

✅ Reallocate capital: Invest in productive sectors: manufacturing, tech, agrotourism.

✅ Use existing stock: Convert excess housing into social housing or long-term rentals.

✅ Urban planning reform:

• Moratoriums in oversupplied areas.
• Limit height, density, and location of new builds.

✅ Sustainable construction:

• Use of solar panels, geothermal systems, green materials.
• Green public infrastructure and incentives for energy efficiency.

✅ Balanced regional growth:

• Prioritize investments in underdeveloped areas with public-private partnerships.
• Stimulate employment and reduce migration pressure.

📢 Albania’s construction sector must pivot from speculative urban overbuilding—centered on dense, unsustainable development—toward strategic, regionally balanced, and environmentally conscious growth. This involves rechanneling capital, enforcing tighter regulations, and aligning construction with real demand and sustainable development goals.

🛑 No new construction needed where vacancy exceeds demand.

🟢 Yes to green, productive, and regionally inclusive development.