Construction industry
Construction industry
Overview
2026 is shaping up to be a year of strong growth with private and public investment in mission-critical, life sciences, and infrastructure projects across APAC and GCC. The APAC and GCC construction industry is expected to record strong growth across most markets through 2025. India, Malaysia, and Singapore have led regional growth, with projected rates of 7.1%, 8.3%, and 5.2%, respectively. The UAE and KSA have also experienced robust expansion, while Australia and Japan achieved steady gains. Major investments in renewable energy, transport, and digital infrastructure, especially data centres and semiconductors, are common growth drivers across all countries. Government policy and budget allocations remain critical support factors. While power availability and energy reliability are key site selection factors, expansion of clean energy infrastructure is a regional theme.
Markets are diversifying beyond traditional sectors, with life sciences emerging as a key focus area in the GCC. Additionally, governments in several countries are strategically pushing green hydrogen, nuclear, and offshore wind energy.
Labour shortages, rising construction and operational costs, along with supply chain disruptions, exacerbated by US tariffs, are persistent industry challenges.
Brian Coyle Regional Director, ANZ
Construction is set for sustained growth, powered by clean energy and digital infrastructure, even as the industry tackles cost and labour challenges.
Construction industry output
From 2026 to 2029, most markets expect annual growth between 3% and 6%, with continued focus on renewable energy, transportation, and digital infrastructure. Political and economic uncertainties, along with labour and cost pressures, will be the key risks that can affect project cost timelines.
Australia
- The Australian construction industry is expected to have grown by 3.8% in real terms in 2025, driven by projects in transport, data centres, manufacturing, and renewable energy.
- From 2026 to 2029, growth is projected to average 3.2% annually, supported by US$3.3bn investment in renewable energy and transport infrastructure.
- As of Q3 2025, the data centre sector has a project pipeline valued at US$34.7bn, with Sydney and Melbourne being the key hotspots.
- Australia is also increasing its focus on battery storage to support clean energy and enhance grid reliability. The extent of renewable energy projects reflect this momentum, including the AU$68.1m 'Merredin Big Battery Energy Storage System' in Western Australia, a 500 MW solar farm with battery storage at Colbinabbin in Victoria, and a 400 MW battery system at Dederang, also in Victoria.¹
India
- In 2025, India's construction industry is projected to have grown by 7.1%, driven by major investments in energy, transport, and industry. Infrastructure is expected to lead with 8.2% growth, supported by a record US$603bn budget allocation.
- Digital infrastructure continues to be a strategic priority. India holds the second-largest semiconductor construction pipeline in APAC by value, estimated at US$88bn following South Korea. It also leads the region in data centre development, with a pipeline valued at US$85.2bn.
- However, labour shortages in fast-growing urban areas remain a significant challenge.
- For data centre projects, access to reliable power, especially for AI applications, is now a key factor in site selection. To address increasing energy demand, the Indian government is pursuing plans to expand nuclear power generation capacity from 8.9 GW to 100 GW.²
- India is established as a global capability center (GCC) hub and is emerging as a leader in life sciences GCCs. Half of the top 50 multinational firms in this sector now operate in India, with many entering in the past five years.
- Recent reductions in 'Goods and Services Tax' (GST) rates have eased financial pressures on the sector. However, new US tariffs may limit short-term growth in certain sub-sectors.
- The construction industry is projected to grow at 6.2% annually from 2026 to 2029, mainly due to investments in renewable energy, manufacturing, data centres, and transportation sectors.¹
Japan
- Japan's construction industry is projected to have grown by 1.6% in 2025, supported by infrastructure for the 2025 World Expo in Osaka and rising investment in renewable energy, data centres, and semiconductor facilities.
- From 2026 to 2029, the industry is expected to grow at an average of 1.3% annually, led by investments in transport infrastructure, offshore wind projects, AI-focused data centres, and semiconductor plants.
- To support the digital growth, the government is also investing in renewable energy. By 2040, Japan aims to expand offshore wind capacity to 45 GW, solar to 150 GW, and battery storage to 30 GW.
- However, a persistent shortage of skilled labour, limited contractor availability, recent US tariffs, and rising construction costs continue to delay project timelines and increase costs.¹
Malaysia
- Malaysia’s construction industry is projected to sustain strong momentum in 2025, with an estimated 8.3% expansion supported by investments in data centres, manufacturing, renewable energy, transport, and infrastructure. Commercial, industrial, and residential segments are expected to deliver double-digit growth, underpinned by continued public and private investment.
- From 2026 to 2029, the industry is projected to grow at an average annual rate of 4%, supported by continued public and private investment in housing, oil, and gas supply chains.
- Rising data centre investments, aligned with Malaysia’s strategy to enhance digital infrastructure, will further support industry growth.
- From 1 July 2025, Malaysia’s expanded Sales and Service Tax (SST) applies a 6% service tax to construction services for non-residential projects, while basic materials remain exempt. The change will impact contractor margins and require budget adjustments.
- Government initiatives such as the 'New Industrial Master Plan 2030', 'National Energy Transition Roadmap', 'National Semiconductor Strategy', and the '13th Malaysia Plan', together with foreign investment, continue to drive growth despite global risks.¹
Singapore
- Singapore’s construction industry is expected to have grown by 5.2% in 2025, led by transport and commercial projects. Some of the key projects that contributed to this growth include the Changi terminal 5 expansion, the Marina Bay Sands upgrade, and a new biomedical facility. The institutional sector, particularly in healthcare and education, is expected to experience double-digit growth of 15%.
- Meanwhile, the industrial sector declined by 1.5% in 2025 due to high import and operational costs. However, a 5.9% average annual growth is projected from 2026 to 2029, led by semiconductor and pharmaceutical manufacturing. At Northern Tuas Basin, 172 ha have been designated for reclamation to support future industrial use, in line with the 'Singapore Manufacturing 2030' vision to increase manufacturing value-add by 50% by 2030.
- Clean energy infrastructure is expanding, with plans for nine hydrogen-compatible power plants and 2 GW peak of solar capacity by 2030. The government has also accelerated the clean energy transition by importing 122.7 million kWh of renewable electricity between January and May 2025, raising the share of renewables to 2.6% of total power consumption.
- Despite growth, cost pressures persist. New US tariffs are disrupting supply chains, and rising shipping, labour and land costs continue to impact project budgets.
- From 2026 to 2029, Singapore’s construction industry is expected to grow at an average annual rate of 4.2%, supported by transport infrastructure investment such as the Land Transport Master Plan 2040. Data centre operators are looking forward to the approval for an additional 300 MW of capacity, which could further boost construction activity.¹
South Korea
- The South Korean construction industry is expected to have contracted by 9.1% in real terms in 2025, primarily due to political instability causing project delays, particularly in the data centre sector. It was coupled with rising household debt, a sluggish housing market, and uncertainty over the implementation of US tariffs.
- Gradual recovery is anticipated from 2026 onwards, with the industry projected to grow at an average annual rate of 2.8% through 2029, driven by investments in semiconductors, transport, renewable energy, and housing.¹
Taiwan
- Taiwan's construction industry is projected to have grown by 4.8% in 2025, supported by industrial, leisure and hospitality, energy, transport, infrastructure projects, and export growth, particularly in high-tech sectors, as well as government investments.
- In April 2025, the government announced a US$2.8bn support package to assist industries impacted by new US tariffs. The aid targeted sectors such as electronics, IT, steel, machinery, auto parts, building materials, and agriculture. Apart from economic support to various industries, the package aimed to support the construction industry through enhanced public infrastructure development and energy infrastructure maintenance.
- From 2026 to 2029, the industry is projected to grow at an average annual rate of 4.1%, led by investments in renewable energy and transport infrastructure.
- Progress toward renewable energy targets has been slow, however the government has introduced new incentives and simplified regulations to encourage further development. After the failed referendum to restart nuclear power projects, Taiwan plans to meet demand through natural gas generation, continued investment in wind and solar, and green energy sources such as hydrogen and geothermal.
- Rising demand from local industries, driven by the adoption of AI applications, continues to attract data centre investment in Taiwan.
- Despite these opportunities, persistent challenges such as labour shortages and limited contractor availability may impact the industry's future growth.¹
KSA
- The KSA's construction industry is estimated to have grown by 4% in real terms in 2025, driven by investments in housing, energy, infrastructure, and giga projects under Vision 2030, including NEOM, Oxagon, Trojena, and preparations for FIFA 2034 and Expo 2030.
- From 2026 to 2029, the construction industry is expected to achieve an average annual growth rate of 5.4%, supported by government initiatives to expand tourism and ongoing investments in industrial, housing, and sports infrastructure. The data centre sector will also continue to attract both public and private investment.
- Industrial sector growth will also be driven by the government’s goal to supply 10% of global hydrogen exports, leading to increased investment in hydrogen production facilities.¹
UAE
- The UAE’s construction industry is expected to have grown by 5.2% in real terms in 2025, supported by significant public and private investments in transportation, rail, road, and housing projects.
- Additional growth is expected to be driven by government spending under the 2026 budget and preparations for the 2027–29 federal budget cycle, which prioritise AI and national development. As of June 2025, Abu Dhabi is managing 619 infrastructure projects worth over US$54.5bn, focused on smart cities.
- The life sciences sector is also receiving increased attention following the launch of the 'Health, Endurance, Longevity, and Medicine' (HELM) cluster in 2025. This initiative is projected to attract US$11.5bn in investment by 2045. The Department of Health (DoH) in Abu Dhabi has also signed several Memorandums of Understanding (MOUs) with major pharmaceutical companies to promote innovation in vaccine development, clinical research, and therapy monitoring.
- Long-term growth is projected at an average annual rate of 4% from 2026 to 2029, driven by investments in tourism, transport, industrial, and housing projects.¹
Construction inflation
Construction cost inflation across APAC and GCC was moderate in 2025 and is expected to remain stable or ease slightly in most markets through 2026.
- Commodity trends are mixed. Copper prices were volatile in 2025 and are forecast to rise in 2026 due to global supply disruptions and strong demand from renewable energy, electrification, and infrastructure upgrades.
- Steel prices continue to decline across the region, driven by global oversupply and weaker demand, providing short-term relief to construction costs. Aluminium prices, which fluctuated in 2025, are expected to face upward pressure in 2026 due to infrastructure and clean-energy investments.
- Cement prices remain sticky, supported by high labour and transport costs, though India has seen some relief in the overall impact of cement-related costs following recent GST cuts.
- Overall, while some easing is seen in select commodities, volatility in metals remain. APAC is positioned for steady, moderate construction inflation in 2026, with steel deflation and stable demand helping to balance upward pressures.
- Labour availability remains a structural challenge. In Japan, severe labour shortages and higher costs are driving construction costs up. Yen volatility is expected to widen the inflation range in 2026 compared to 2025, while structural and logistical costs for concrete continue to add pressure.
- In Australia, labour cost inflation has eased slightly but remains high, compounded by elevated transportation and logistics costs.¹
- In Singapore, new compliance requirements introduced in June 2025 require all construction firms to register with the 'Building and Construction Authority's' (BCA) contractors registration system to hire or renew passes for foreign workers, adding additional costs.²
- Across the region, labour shortages continue to pose challenges. Global demand for specialised labour is adding additional pressure. For example, India is facing labour shortages in mission-critical projects due to rising demand from the Middle East, and competition for skilled workers is intensifying. The shortage is most acute for specialised roles.
Supply chain outlook
Notes
In Q3 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 enters 2026 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
† India
‡ Japan
The timelines provided are based on specific specifications and brands, as reported in Q3 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.
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