Construction Industry Set for Continued Growth Backed by Infrastructure Rollout and Data Centre Expansion
PETALING JAYA, June 11 — Malaysia’s construction sector is expected to sustain its positive growth trajectory throughout 2026, supported by a strong project pipeline, rising investments in data centres and the implementation of major infrastructure developments.
According to MBSB Research, the industry remains well-positioned for expansion despite increasing cost pressures affecting contractors and building material manufacturers.
The research house noted that leading construction companies continue to maintain healthy order books while benefiting from a steady flow of new project opportunities from both public and private sectors.
Among the major beneficiaries are expected to be Sunway Construction Group Berhad, IJM Corporation Berhad, Malaysian Resources Corporation Berhad and WCT Holdings Berhad, which remain active participants in large-scale infrastructure and commercial tenders.
Building material suppliers such as Malayan Cement Berhad and CMS Berhad are also expected to benefit from stronger demand generated by ongoing construction activities nationwide.
Nevertheless, the sector continues to face challenges from rising input costs, particularly for raw materials, energy and logistics.
MBSB Research warned that these cost increases could place pressure on profit margins over the next few quarters before gradually easing.
Under its base-case assumptions, a 30 to 35 per cent increase in construction material costs could reduce net margins by between two and five percentage points, especially for contracts where cost escalation clauses are limited or unavailable.
Steel reinforcement prices have continued to rise, recording a third consecutive monthly increase through April 2026.
Average prices climbed five per cent month-on-month to RM2,347.50 per metric tonne, reflecting stronger market demand and increased construction activity.
Although current prices remain well below the record levels seen in 2022, the upward trend signals continued recovery within the sector.
Meanwhile, cement prices have remained stable at RM410 per tonne since December 2025, supported by sustained demand from industrial developments, infrastructure works and data centre projects.
However, production costs are increasing due to higher coal and electricity prices, both critical components in cement manufacturing.
Coal procurement costs have risen to approximately US$90 per tonne compared with around US$65 previously, while electricity expenses have also increased.
Should these trends persist, producers may eventually review pricing structures to protect profitability.
Data released by the Department of Statistics Malaysia showed that the construction sector expanded by 8.5 per cent year-on-year during the first quarter of 2026.
Although slower than the previous quarter’s growth rate, the performance marked the industry’s 13th consecutive quarter of expansion.
The total value of construction work completed during the period reached RM46.5 billion.
Civil engineering remained the largest segment, contributing RM15.9 billion, followed by non-residential buildings at RM13.9 billion, residential projects at RM10.5 billion and specialised construction activities worth RM6.2 billion.
Specialised trade activities emerged as the fastest-growing segment with growth of 24.6 per cent, while non-residential construction expanded by 12.7 per cent, largely fuelled by industrial developments and data centre projects.
The private sector continued to drive overall industry growth, accounting for more than 65 per cent of total construction activity.
Regionally, Selangor remained the country’s largest construction market with RM10.9 billion worth of projects, followed by Johor at RM9.5 billion, Wilayah Persekutuan Kuala Lumpur at RM4.8 billion and Sarawak at RM4.6 billion.
Figures from the Construction Industry Development Board Malaysia showed that 5,842 projects valued at RM84.4 billion were awarded during the first five months of the year.
Looking ahead, analysts expect stronger momentum in the second half of 2026 as major infrastructure projects, including the Penang LRT development, enter active construction phases.
The potential award of several large-scale data centre projects worth more than RM1.5 billion each is also expected to provide a significant boost to the industry’s growth outlook.
