Demand remains strong and most APAC markets are on target to grow, but issues surrounding labour, project delivery and supply chains are hitting sustained investment in digital infrastructure, manufacturing, energy, transport and major public programmes.
GCR spoke to Scott Halyday, Linesight’s regional director for southeast Asia, about the report and the APAC construction sector.
What factors are affecting construction in APAC countries?
Starting with Singapore, construction output there is forecast to rise by 4.5% in real terms in 2026, with medium‑term annual growth of around 4% to 2030.
The construction industry is being boosted by strong investment in major infrastructure projects, including Changi Airport Terminal 5, the Marina Bay Sands expansion, new hospitals and rail extensions.
Growth is also supported by continued demand for manufacturing facilities, data centres and increasing investment in biomedical and pharmaceutical facilities.
Government incentives for digital construction, robotics and sustainability initiatives are further encouraging growth and productivity improvements.
However, Singapore faces several constraints. Persistent shortages of skilled labour and tight subcontractor capacity are increasing project delivery risks and affecting contractor pricing.
Construction costs are also being driven higher by rising oil, freight and commodity prices, while Singapore’s reliance on imported materials leaves it vulnerable to global supply chain disruptions. In addition, stricter sustainability requirements for new data centres and challenges in scaling modular construction are adding complexity to project delivery.
Malaysia
Scott Halyday, Linesight’s regional director for southeast AsiaMalaysia’s construction industry is being boosted by strong growth in manufacturing, data centres and major transport infrastructure projects.
Data centres are a major driver, particularly in Johor, which benefits from spillover demand from Singapore and strong interest from hyperscale operators. New growth hubs are also emerging in Cyberjaya, Kuala Lumpur and Negeri Sembilan, supported by the availability of cheaper land, reliable grid access, good transport connectivity and relatively lower water-stress risks.
In addition, semiconductor investments in Penang and Kulim are supporting demand for industrial and high-tech construction. These factors are expected to push output growth to 6.5% in 2026 – which is the highest among the APAC markets covered in Linesight’s latest Construction Market Insights Report – and continued growth through 2030.
But Malaysia also faces increasing pressure from rising construction costs and resource constraints. Construction inflation is forecast at 5-6% in 2026, driven by higher oil prices, freight costs and commodity prices linked to regional geopolitical tensions.
Domestic factors, including proposed reductions in government subsidies, labour shortages and strong construction demand, are adding further cost pressure.
Labour shortages remain a significant challenge, prompting reliance on both local and international contractors, while intense competition in the data centre market is influencing project delivery strategies and squeezing margins.
Thailand
Thailand’s construction industry is experiencing a steady recovery and output is expected to increase by 3.7% in 2026, supported by growing investment in renewable energy, transport infrastructure, tourism-related developments and industrial projects.
Looking ahead, data centres, clean energy projects and smart industrial estates are expected to become the main growth drivers. Thailand is also emerging as a strategic data centre hub in Southeast Asia, with approximately US$29 billion of projects under development.
Government support through the Board of Investment, including approvals for new data centres, clean energy and infrastructure projects, as well as the FastPass programme, is helping to accelerate investment. Efforts to address bottlenecks around electricity access, land approvals and visa processes are also expected to unlock further construction activity. From 2027 to 2030, the Thai construction industry is forecast to grow at an annual average rate of 4.3%.
Key constraints here include construction inflation and labour shortages. Construction inflation is forecast at 3.5% to 4.5% in 2026, driven by higher oil, freight and commodity costs linked to wider geopolitical tensions. Labour shortages remain a significant challenge, particularly as demand increases for specialist data centre skills.
Table courtesy of LinesightRising wages and a limited domestic talent pool are forcing contractors to rely more heavily on foreign workers, while work permit approvals continue to lag market demand. In addition, weather-related disruptions frequently affect project schedules, requiring contractors to build greater contingency into planning and delivery programmes.
India
India’s construction industry expanded by 7.2% in 2025 and is set for continued growth, with output projected to increase by 6.4% in 2026 and to average 6% annually from 2027 to 2030.
This is being driven by strong public infrastructure spending, rapid data centre expansion, semiconductor investment, growth in the life sciences sector, and continued demand for commercial developments from Global Capability Centres.
India leads the region in data centres with a pipeline valued at US$114bn.
Government initiatives such as tax incentives for data centres, the India Semiconductor Mission 2.0, and Biopharma SHAKTI are further supporting construction activity, while increased domestic manufacturing of construction equipment and materials is improving supply-chain resilience.
Rising costs and delivery pressures remain a challenge in India. Construction inflation is forecast at 4.5% to 6% in 2026 due to higher oil, freight and commodity prices, rising wages, labour code changes and rupee weakness.
Skilled labour shortages, limited contractor capacity and weak contract enforcement are affecting project schedules and delivery certainty. India’s dependence on Gulf energy supplies also leaves it vulnerable to geopolitical disruptions, increasing material and fuel cost volatility.
Japan
Japan’s construction industry is projected to grow by 1.5% in 2026 supported by investment in data centres, semiconductors, renewable energy and industrial projects. Government initiatives under the Green Transformation (GX) programme, substantial funding for AI and semiconductor development, and growing demand for data centre capacity are driving construction activity.
Expansion of semiconductor hubs such as Kumamoto and Hiroshima, alongside the development of new data centre locations in Osaka, Kyushu and Hokkaido, is creating sustained demand for specialist construction and MEP-intensive facilities. Between 2027 and 2030, Japan’s construction industry is forecast to expand at an average annual rate of 1.2%.
However, labour shortages remain severe, with many contractors reporting limited capacity to take on new large projects. Construction inflation is forecast at 5% to 6% in 2026, driven by higher oil, freight and commodity prices, yen depreciation and Japan’s heavy reliance on imported energy.
Power availability has also become a major bottleneck, with grid connection timelines of up to five to ten years in some regions, affecting both data centre and semiconductor projects.
Land constraints in Tokyo and increasingly stringent energy-efficiency requirements for new data centres are adding further complexity to project delivery.
What external forces are having the greatest effect on the construction market?
APAC remains one of the strongest growth regions globally for construction, but the clearest theme is rising delivery risk, even as activity levels remain high.
The industry here is increasingly shaped by execution constraints rather than demand, and the key factors and forces are labour availability, supply chain resilience, power and utility capacity, and geopolitical developments.
Across many markets, a limited pool of skilled workers, specialist contractors and technical expertise is putting pressure on project delivery, cost certainty and programme schedules. As demand from sectors such as data centres, semiconductors, energy and life sciences continues to grow, competition for skilled resources is expected to intensify.
The rapid expansion of this demand puts pressure on power networks. In several markets, access to grid capacity and long connection timelines are becoming key determinants of project viability and investment decisions.
Another major factor is supply chain and geopolitical risk. Ongoing regional conflicts are increasing oil prices, freight costs, insurance costs and commodity price volatility. These pressures are contributing to higher construction inflation and longer procurement timelines, particularly for specialist equipment and imported materials. As of July 2026, escalating tensions in the Middle East continue to increase uncertainty, and we expect supply chain risks and knock-on effects to remain in the medium term.
What advice would you offer contractors to reduce project risk?
Delivery risk has become the construction’s most pressing challenge. Earlier planning, more disciplined procurement, and careful contractor selection is becoming increasingly important.
To avoid delays, delivery teams must also develop their design and supply chain engagement strategies in parallel.
Linesight’s Construction Market Insights Report is available here.Further Reading:
India’s 2027 construction output to exceed $1 trillion Deal to create Malaysia’s biggest construction company fails Singapore finally starts work on $3.5bn Terminal 5 Japanese firm now fifth biggest US housebuilder after $4bn acquisitionAsia Pacific snapshot: Builders straining to meet demand Global Construction Review.
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