ASIA (NORTH)
Industrial and infrastructure projects drive growth in region’s construction sector
The North Asian construction sector is currently undergoing a fundamental structural realignment. In Mainland China, the industry is pivoting away from a property-centric growth model toward an economic framework prioritised by industrial modernisation. Construction output is increasingly focused on high-specification manufacturing facilities and the strategic upgrading of national infrastructure, formalised under the inaugural phase of the 15th Five-Year Plan.
Hong Kong continues to demonstrate steady output levels, primarily anchored by a robust and consistent pipeline of public sector works. While private sector sentiment remains tempered by weak housing demand, high costs and developer caution, the sustained momentum of government-backed land creation and transport connectivity initiatives provides a critical baseline of activity for the regional construction market.
Contrasting outlook across market sectors
The residential sector continues to undergo a protracted phase of consolidation. In Mainland China, strategic emphasis has transitioned toward the delivery of existing projects and the expansion of subsidised housing programmes. Similarly, in Hong Kong, while the private commercial market remains subdued, public housing delivery remains a pivotal government objective to address long-term social mandates. Concurrently, the office and retail sectors continue to face challenges due to evolving regional demand patterns.
Conversely, there is a marked surge in demand for industrial and infrastructure projects across the Greater China region, catalysed by state efforts to meet the 15th Five-Year Plan objectives. Within this growth, data centres, healthcare and aged care facilities are positioned for expansion.
Competition keeps tender prices in check
Tender prices across North Asia have experienced a moderate downward fluctuation over the past year, as the region's industry undergoes broad consolidation. This trend was largely precipitated by intensified competition among contractors for a reduced volume of private sector development contracts. Looking ahead to the next 12 months, tender prices are projected to remain stable or experience further moderate softening.
Persistent upward pressure from rising labour costs is currently being mitigated by a highly competitive bidding environment, the adoption of modern methods of construction (MMC), and sophisticated procurement strategies. In Mainland China, pricing remains acutely sensitive to shifts in government policy and the availability of credit for large-scale infrastructure works.
Recovery dependent on government investment
The volatility of previous years has stabilised. The persistent shortage of skilled labour remains the primary driver of cost concerns, necessitating a more disciplined and strategic approach to workforce management. The industry is anticipated to recover in alignment with a projected market revival. This recovery is dependent on the sustained support and stabilisation efforts of governments, particularly through the influx of capital into public works and new infrastructure projects.
The industry is responding by accelerating the integration of modular integrated construction (MiC) and multi-trade integrated mechanical, electrical and plumbing (MiMEP) techniques. These methodologies, paired with advanced digital management tools including building information modelling (BIM), are being utilised to enhance delivery certainty and offset labour shortages. As these technologies transition toward maturity, the industry may experience temporary upward price pressures during the initial phase of technological adoption and training.
“The persistent shortage of skilled labour remains the primary driver of cost concerns, necessitating a more disciplined and strategic approach to workforce management.”
ASIA (SOUTH EAST)
Construction sector stays on growth trajectory despite global headwinds
Construction activity across Southeast Asia recorded healthy year-on-year growth of 5% to 15% in 2025, largely driven by continued public sector investment and national development agendas. Infrastructure works remained the cornerstone of growth, with governments prioritising long-term connectivity, logistics and urbanisation goals.
In Cambodia, the completion of Techo International Airport marked a major milestone, while other key initiatives, such as the cross-border transport corridor with Vietnam, remain under active development.
Vietnam is expected to maintain a strong growth trajectory, with construction output projected to expand by 6% to 8% in 2026. This is supported by a robust pipeline of infrastructure and industrial projects, particularly in energy and manufacturing hubs. Foreign investment in export-oriented industries continues to drive demand for logistics and warehousing developments, along with supporting infrastructure.
Tender prices maintain upward trend
Tender prices are expected to continue their upward trend across Southeast Asia, with escalation projected in the range of 2% to 7%, consistent with post-pandemic dynamics. However, the magnitude of escalation will vary by city. Singapore, Ho Chi Minh City and Jakarta are expected to see faster escalation.
In Singapore, several large-scale public sector tenders are anticipated in 2026, following a year of steady tender awards in 2025. Persistent labour shortages and wage inflation, coupled with elevated material costs and global uncertainties, are expected to push tender prices up by 3% to 5%. In contrast, Kuala Lumpur and Phnom Penh are projected to experience a moderation in tender price escalation compared to the previous year.
Macro risks temper region’s outlook
At the macro level, geopolitical tensions and global trade fragmentation remain significant risks to the regional outlook. Supply chain disruptions, protectionist policies and fluctuating commodity prices continue to affect input costs and project scheduling.
Open economies such as Singapore and Vietnam face heightened exposure to external shocks, while countries heavily reliant on foreign direct investment, including Cambodia, are more vulnerable to shifts in investor confidence and financing conditions. By contrast, Indonesia’s construction market remains comparatively insulated due to its strong domestic demand base, which continues to support activity despite global headwinds.
Activity in 2026 will vary across markets
Looking ahead, the pace and profile of growth will differ across markets. Public sector and infrastructure developments will remain the key drivers, while activity in other sectors such as residential and commercial is likely to moderate. In Malaysia, for instance, a slowdown in private sector development may lead to an overall dip in construction demand. That said, anticipated interest rate cuts could help stimulate investment and reverse this trend.
As 2026 unfolds, the construction sector in Southeast Asia remains on a growth path. However, the year ahead will be shaped by uneven sectoral growth, sustained cost pressures, and a fluid geopolitical landscape – all of which will test the resilience of contractors, investors and policymakers across the region.
“Public sector and infrastructure developments will remain the key drivers, while activity in other sectors such as residential and commercial is likely to moderate.”
RLB © 2026 Rider Levett Bucknall.