Construction industry

Sections: Construction industry output Construction inflation Supply chain outlook

Overview

APAC and GCC's construction industry has experienced a mixed performance.

In 2025, construction output in APAC is set to grow steadily across the region, led by strong activity in data centers, infrastructure, industrial and energy sectors.

Commercial construction remains positive, while residential growth is mixed. Government spending coupled with large scale projects and industrial expansion are key drivers, though geopolitical tensions and trade wars may impact export-led markets.

Ciaran McCormack Regional Director, GCC

Moderate growth is being seen with investments in renewables, data centres and infrastructure. Global uncertainty on US tariffs, and general economic slowdown continue to affect the construction industry.

Construction industry output

Looking ahead to 2025, rising investments in renewables, data centres, and infrastructure will drive momentum, though shifting trade policies could pose challenges.

Australia

Australia's construction industry grew by 2.6% in 2024, driven by transport and energy infrastructure projects.
The industry is projected to grow at an average annual rate of 2.9% from 2025 to 2028, supported by US$78.1bn in transport projects and 6.4GW of new renewable energy capacity.

India

India’s construction industry is set for sustained growth, following a 7.8% expansion in 2024 and is projected to grow by 6.2% in 2025.
This momentum is fuelled by robust investments across energy, transport, data centres, manufacturing, research, and residential segments.
Key government initiatives, such as the development of Small Modular Reactors (SMRs) and the Production Linked Incentive (PLI) scheme—are expected to further accelerate growth in the energy and industrial sectors.

Japan

Japan’s construction industry is estimated to have recorded modest growth of 0.5% in 2024, supported by infrastructure development for the 2025 World Expo in Osaka and increased investments in renewable energy.
Between 2025 and 2028, the industry is projected to grow at an average annual rate of 1.3%, driven by strategic investments in transport infrastructure, data centres, semiconductor facilities, and offshore wind projects. However, a persistent shortage of skilled labour continues to hinder timely project execution, posing a critical challenge to the industry’s growth momentum.

Malaysia

Malaysia’s construction industry is estimated to have grown by 15% in 2024, driven by robust investments in renewable energy and transport infrastructure.
From 2025 to 2028, the sector is projected to grow at a steady annual rate of 4.4%, supported by sustained public and private sector investments across manufacturing, housing, data centres, and renewable energy.
The government’s push to strengthen supply chains, along with increased private investment in oil and gas, is expected to further reinforce the industry’s upward trajectory.

Singapore

Singapore’s construction industry expanded by 3.3% in 2024, propelled by increased construction contracts which grew by 34% YoY in the first nine months of 2024 and increased investments in energy, transport, and industrial sectors.
The construction industry is expected to see an average annual growth of 4.1% from 2025 to 2028, fuelled by investments in oil and gas, transport, and renewable energy projects, alongside government goals to achieve 2 GW peak solar capacity by 2030 and carbon neutrality by 2050.
The US$25.4bn ‘Land Transport Master Plan 2040’ and US$13.5bn undersea energy cable project will boost long-term growth.

South Korea

South Korea’s construction industry shrank by 1.9% in 2024 and is forecast to contract by 1.2% in 2025. 2024 was driven by a 12.6% YoY decline in building permits in the first ten months of that year, with the residential sector continuing to struggle. Construction bankruptcies also rose by 13% during the same period, some influenced by rising costs.
Recovery is anticipated from 2026 onwards, driven by semiconductor investments and infrastructure projects like US$19.5bn underground railway project and a 6.2 GW offshore wind project.

Taiwan

Taiwan's construction industry grew by 2.5% in 2024, driven by industrial and export growth, and will rise to 3.6% in 2025.
Government plans to invest between US$97 – $129bn in infrastructure and green energy by 2028 will further support the industry.
However, limited contractor capability is adding strain, challenging the timely execution of projects.

KSA

The KSA’s construction industry grew by 4.6% in real terms in 2024, driven by investments in housing, energy, and infrastructure projects.
The KSA’s FIFA 2034 preparations has fuelled major construction activity, including 11 new stadiums and key infrastructure projects. Vision 2030 is driving US$1.3tn in investments across real estate, transport, and NEOM to diversify the economy and reduce oil dependence.
In H1 2024, construction contracts surged 47% YoY to US$49.3bn, fuelled by major deals in oil, gas, and real estate.
From 2025 to 2028, the industry is expected to grow at an average annual rate of 5.2%, supported by giga projects like NEOM, Oxagon floating port city project, Trojena tourism project and preparations for Expo 2030, alongside a push for 58.7 GW renewable capacity by 2030.
Additionally, the KSA is channelling significant investments into gigaprojects and data centres, driven by the rise of AI and an ambition to become the world’s most digitised economy, bolstered by Vision 2030 goals.

UAE

The UAE's construction industry grew by 6.8% in 2024, driven by major investments in transportation, energy, and housing projects.
In 2025 it is expected to grow by 4.2% supported by increased government spending, with the FY 2024-2025 Federal Budget rising 11.6% YoY to US$19.5bn, including US$708m for infrastructure.
Long-term expansion will be fuelled by the US$163bn energy transition plan through to 2050 and also by US$18bn in Abu Dhabi infrastructure projects. Additionally, the UAE’s ambitious goal to attract US$150bn in Foreign Direct Investment (FDI) by 2031 is set to accelerate industrial and commercial construction.

Construction inflation

Inflation in most Asia-Pacific economies returned to or near target in 2024, supported by easing commodity prices and supply chain improvements, though rising U.S. trade tensions remain a downside risk. Meanwhile, GCC inflation stays contained but is projected to rise moderately in 2025, driven mainly by higher housing costs.

Prices for copper and aluminium surged in 2024 largely due to optimism surrounding potential infrastructure stimulus in China, along with speculative buying in anticipation of US tariffs on copper imports. Additionally, sustained global demand from renewable energy and electrification sectors is reinforcing upward price trends. While some moderation is anticipated in the second quarter, these metals are expected to remain on a long-term growth trajectory. Given their extensive use in MEP systems and façade packages, these price increases are putting sustained pressure on the cost of complex construction projects.

Steel rebar prices have continued their downward trajectory in early 2025, primarily due to global oversupply and weakening demand in the manufacturing and construction sectors. The imposition of US tariffs has inadvertently increased domestic steel availability, further contributing to price declines in some regions. APAC and GCC markets, in particular, are expected to see continued softness in steel pricing through the second quarter. That said, a mild rebound is anticipated in the latter half of the year as demand stabilises slightly, and supply chains adjust.

Cement and brick prices remain elevated but have shown signs of regional stability. While some minor dips have been observed, particularly in markets with lower construction activity, the broader trend remains upward, especially in regions with strong infrastructure pipelines.

Given ongoing uncertainty around OPEC+ production levels and global energy markets, volatility in input costs is likely to persist.

Labour availability continues to be a key inflationary factor in the construction industry. Although some regions have seen easing wage pressures, particularly Singapore and Australia, where construction labour inflation eased to approximately 1.5% in 2024 (from 9% in 2023) and 3.7% (from 4.1%) respectively, structural skilled labour shortages persist putting pressure on the cost of construction.1,2 In Malaysia, Japan, and Taiwan, rising minimum wages continue to exert upward pressure on project costs.

Mission-critical sectors such as data centres, renewable energy facilities, and AI-driven infrastructure projects are facing inflationary pressures. These sectors are experiencing tight contractor availability and longer lead times for equipment.

Global geopolitical tensions continue to contribute to the overall inflationary risk premium in the construction industry. Trade restrictions, tariff uncertainties, and raw material bottlenecks are creating unpredictable cost scenarios for developers and contractors. These factors, coupled with energy market volatility, are amplifying volatility in cost planning and procurement.

Supply chain outlook

Notes

In Q1 2025, market conditions for APAC continued to show signs of stabilisation, supported by easing commodity prices, improved economic outlooks, and greater supply chain competition. These factors contributed to more favourable unit pricing and reduced lead times. There is market optimism that lead times are anticipated to remain steady for 2025. However, any open opportunities with manufacturers are quickly absorbed by the high demand. Overall, APAC entered 2025 in a more balanced position. However, tariff-related volatility and any reliance on components sourced from the US present ongoing risks, especially regarding lead times and procurement certainty.

Australia

Transformers refer to smaller dry cast resin type transformers. For large oil filled transformers, typical delivery timelines are >12 months.

India

Increase in power transformer's lead time due to global demand which is impacting local projects as well.
Transformers – longer lead times on some DC projects seen. High-capacity imported ones are in the range 40-50 weeks.
Lead time increased further from past cycle. Higher capacity generators are the most impacted ones.
Though the UPS supply chain seems stable, a possible increase in lead time can be anticipated.
STS - Due ongoing global conflicts and logistics disruptions a possible increase in lead time anticipated.

KSA and UAE

The timelines provided are applicable for generators with a capacity of 3,000 KVA or above.
Locally manufactured switch gears are assumed in the specifications.

The timelines provided are based on specific specifications and brands, as reported in Q1 2025, and reflect market conditions at that time. However, it's important to note that market conditions are subject to geopolitical and other influences which may cause supply chain disruptions that could impact the delivery schedules of equipment. Therefore, the timelines mentioned above are indicative and subject to change.

Sources

Australian Bureau of Statistics
Ministry of Manpower Singapore

Disclaimer

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