Asia-Pacific Construction Market Brief: Builders Strive to Meet Demand

According to the latest report by Irish construction consulting firm Linesight, the Asia-Pacific (APAC) construction market, after a strong start in 2026, is facing disruptions from energy and external economic factors. Demand remains strong, with most markets expected to grow, but labor, project delivery, and supply chain issues are dragging on sustained investment in digital infrastructure, manufacturing, energy, transportation, and major public projects.

Scott Halyday, Linesight's Regional Director for Southeast Asia, interpreted the report for *Global Construction Review*.

Singapore: Construction output is expected to grow 4.5% in real terms in 2026, with a compound annual growth rate of about 4% through 2030. Investment is strong in major infrastructure projects such as Changi Airport Terminal 5, the Marina Bay Sands expansion, new hospitals, and rail extensions. Demand for manufacturing facilities, data centers, and biomedical facilities continues. The government encourages digital construction, robotics, and sustainability initiatives. However, a chronic shortage of skilled labor and tight subcontractor capacity are driving up delivery risks; rising oil, freight, and commodity prices are pushing up construction costs; reliance on imported materials makes it vulnerable to global supply chain disruptions; new sustainability requirements for data centers and challenges in scaling modular construction add complexity.

Malaysia: Strong growth in manufacturing, data centers, and major transportation infrastructure projects. Data centers are the main driver, especially in Johor, benefiting from spillover demand from Singapore and strong interest from hyperscale operators. New growth hubs are emerging in Cyberjaya, Kuala Lumpur, and Negeri Sembilan, thanks to low land costs, reliable grid access, good transportation links, and low water risk. Semiconductor investments in Penang and Kulim support industrial and high-tech construction demand. Output is expected to grow 6.5% in 2026, the highest in the Asia-Pacific market, with growth continuing through 2030. However, construction costs are rising and resource pressures are increasing. Construction inflation is expected to be 5%-6% in 2026, driven by rising oil, freight, and commodity prices. Domestic factors include proposed cuts to government subsidies, labor shortages, and strong construction demand. Labor shortages remain severe, and intense competition in the data center market is affecting project delivery strategies and compressing profit margins.Thailand: The construction industry is steadily recovering, with output expected to grow by 3.7% in 2026, benefiting from investments in renewable energy, transportation infrastructure, tourism-related development, and industrial projects. In the future, data centers, clean energy projects, and smart industrial parks will become the main growth drivers. Thailand is becoming a strategic data center hub in Southeast Asia, with about USD 29 billion in projects under construction. The Board of Investment is accelerating investment by approving data center, clean energy, and infrastructure projects as well as the FastPass program. Addressing bottlenecks in power access, land approval, and visa processes is expected to further unlock construction activity. The average annual growth rate of the construction industry from 2027-2030 is expected to be 4.3%. Key constraints include construction inflation (estimated at 3.5%-4.5% in 2026) and labor shortages, particularly in data center specialized skills. Rising wages and limited domestic talent are forcing contractors to rely more on foreign workers, while work permit approvals lag behind market demand. Weather-related disruptions also frequently affect project schedules.

India: The construction industry grew by 7.2% in 2025, with output expected to grow by 6.4% in 2026, and an average annual growth of 6% from 2027-2030. Drivers include strong public infrastructure spending, rapid data center expansion, semiconductor investment, growth in the life sciences sector, and demand for commercial development from global capability centers. India leads Asia-Pacific in data centers, with a pipeline of projects under construction worth USD 114 billion. Government initiatives such as data center tax incentives, India Semiconductor Mission 2.0, and Biopharma SHAKTI further support construction activity, while domestic manufacturing of construction equipment and materials strengthens supply chain resilience. Challenges include rising costs and delivery pressures, with construction inflation estimated at 4.5%-6% in 2026 due to increases in oil prices, freight rates, and commodity prices, wage hikes, labor law amendments, and rupee depreciation. Shortages of skilled labor, limited contractor capacity, and poor contract enforcement affect project schedules. India's reliance on Gulf energy supply makes it vulnerable to geopolitical disruptions.

Japan: The construction industry is expected to grow by 1.5% in 2026, benefiting from investments in data centers, semiconductors, renewable energy, and industrial projects. Government green transformation plans, AI and semiconductor development funding, and demand for data center capacity drive construction activity. Expansion of semiconductor hubs in Kumamoto and Hiroshima, as well as new data center sites in Osaka, Kyushu, and Hokkaido, create sustained demand. The average annual growth rate from 2027-2030 is expected to be 1.2%. Labor shortages are severe, and many contractors have limited capacity to take on large new projects. Construction inflation is estimated at 5%-6% in 2026, due to increases in oil prices, freight rates, and commodity prices, yen depreciation, and reliance on imported energy. Power availability becomes a major bottleneck, with grid connection taking 5-10 years in some areas, affecting data center and semiconductor projects. Land restrictions in Tokyo and new energy efficiency requirements for data centers add complexity to project delivery.External Forces Impacting the Construction Market: Asia-Pacific remains one of the strongest regions for global construction growth, but the most prominent theme is rising delivery risk, even as activity levels remain high. The industry is increasingly driven by execution constraints rather than demand, with key factors including labor availability, supply chain resilience, power and utility capacity, and geopolitical developments. In many markets, skilled workers, specialized contractors, and technical experts are limited, putting pressure on project delivery, cost certainty, and schedules. As demand continues to grow in sectors such as data centers, semiconductors, energy, and life sciences, competition for skilled resources will further intensify.