REGIONAL OVERVIEW
Asia
ASIA
Continued growth meets a quickly changing and more complex construction landscape
In recent years, Asian economies have been influenced by the direction of China’s changing economic and political landscape. Declining productivity, weaker growth and shifting government priorities during the pandemic years sent ripples across the continent. Even as China and several of its neighbours continue to rebound, this rebalancing has led to countries across the region identifying new opportunities for growth - and Asia is poised for another phase of rapid economic expansion.
From booming investment in data centres - with US$800 billion of investment in the pipeline up to 2030 - through to surging advanced manufacturing and logistics sectors, the opportunities for construction are vast. Now the question is whether the right amount of skilled labour is available to meet demand.
This is naturally keeping costs high. Last year’s GCMI recorded five Japanese markets in the top 15 globally, and this remains the case in 2026 – with Osaka overtaking Tokyo as the most expensive place regionally, ranked as the seventh costliest market in the world. The average cost to build in Tokyo is now US$5,540.0 per m² compared to US$5,801.0 in Osaka. This shift is a product of Osaka’s blossoming data centre industry as a strategic location serving central and eastern parts of Japan.
While opportunities exist across the continent, the picture is not uniform. Asia is increasingly a two-speed market. Several locations are experiencing localised volatility, sector-specific corrections and geopolitical pressures that are shaping investment decisions in different ways.
In several economies with only modest headline GDP growth, such as South Korea and Japan, construction activity remains markedly robust as investment continues to flow into strategic sectors and nationally significant development programmes.
BREAKDOWN DATA
TOP PERFORMING SECTORS
Residential and social housing
Data centres
Industrial and logistics
Spotlight on data centres - reshaping the region as a primary growth engine
Data centres are having an outsized effect on construction demand across the region, particularly in established markets of China, Japan and Korea, but also in South East Asia. It remains one of the two largest sectors for activity and is increasingly pulling in specialist contractors, mechanical and electrical trades, equipment suppliers and technical supervision talent at a pace that many local markets are struggling to absorb.
In some markets, mainstream commercial and mixed-use projects are increasingly competing with digital infrastructure and manufacturing schemes for the same labour pools, subcontractors and plant capacity. This is the case in Ho Chi Minh City, where the average price to build has risen to US$1,119.0 per m² - driven in part by skilled labour shortages, cited as the biggest challenge currently facing the market.
When factoring in the increasing pull of resources towards data centre projects, it creates a de facto premium across the continent, with projects outside the highest-growth sectors often facing higher pricing, tighter tender returns and reduced contractor appetite.
Labour shortages becoming a structural constraint
Labour shortages in Asia are no longer confined to isolated trades or short-term fluctuations in workload; they are becoming a fundamental challenge affecting both mature and emerging markets. This reflects the growing global trend towards labour immobility and skills shortages becoming one of the construction industry’s greatest challenges.
Nine in 10 Asian markets say skilled labour shortages are having either a large or major impact on construction delivery. This is most visible in specialist mechanical, electrical and plumbing (MEP)-intensive work. Markets across southern and Southeast Asia like Hyderabad and Kuala Lumpur (where labour has traditionally been abundant) report labour shortages in several areas, especially in MEP trades. This is reflected in higher construction inflation figures, with both Hyderabad and Kuala Lumpur expecting a 5.0% rise in 2026 and Singapore rising from 1.0% in 2025 to 4.0% this year.
China’s recent economic softening has led to some migration out of the country to other markets, helping to meet demand for skills. This is not a long-term solution as the Chinese economy looks set to strengthen again and construction activity is due to pick up.
While policy solutions will be needed to attract new talent to the sector, clients can also mitigate the labour shortages through deeper early engagement with contractors, helping them to upskill their teams to meet specific project demands.
Global volatility opens new doors for key sectors
- Geopolitical uncertainty, supply-chain disruption and changing patterns of global investment are encouraging the construction industry to rethink sourcing strategies, localise production where possible and build greater resilience into project planning.
- Nearshoring continues to open up opportunities for manufacturing-led construction especially in South East Asia. For example, global automotive manufacturing giant Stellantis is consolidating its Asian supply chains in India, Thailand and South Korea. This wider trend is evidenced by the industrial and logistics sectors remaining one of the region’s strongest according to our survey.
- Office building and fit-outs are also seeing upticks in construction activity. Emerging markets seeing growth include Manila and Hanoi. Manila is strengthening its position as an offshore hub for services such as call centres and human resources, due to English-speaking talent and the ability to run 24/7 operations serving both the east and west.
- Meanwhile Vietnam continues to build on its reputation as a manufacturing outpost and ‘factory to the world’. The average cost to build in these markets in 2026 are US$1,117.0 and US$1,079.0 per m², respectively.
Momentum in Mumbai
India continues to stand out for breadth of demand, with infrastructure, commercial occupier activity and a strengthening residential market all contributing to momentum, particularly in major urban centres.
In Mumbai for example, there is set to be an inflationary jump from 5.0% this year to 15.0% in 2027 - as booming demand for more transport infrastructure and commercial space is accelerating demand for land, materials and labour. The average construction cost here in 2026 is US$667.0 per m².
Across the region, the construction outlook remains very positive. Asia is not simply growing; it is being reshaped by changing global demand and shifting economic and political norms.
For clients, the implication is clear: success will depend on understanding where demand is deepest, where capacity is tightest and how resilience, localisation and digital capability can be translated into practical delivery advantage.
AI’s emergence puts digital transformation in the spotlight
Artificial intelligence’s capability as a tool to improve delivery and cost management is being increasing recognised across global construction. In Asia, digital adoption is advancing, but unevenly.
AI is now firmly part of the strategic conversation across the region, particularly among end-user and supply-chain participants operating in sectors that are already digitally mature. The focus is on using AI primarily for:
- Cost modelling
- Speed of analysis
- Design support
- Workflow automation
In most markets however, AI is not yet embedded deeply enough to fully transform delivery models or materially ease current labour shortages. For now, it is often viewed as a differentiator than a fully operational solution.
A consistent challenge for AI integration across Asia is digital skills and capabilities - with 16 markets identifying this as either a substantial or major constraint to wider and more effective deployment of AI in projects.
Data sovereignty concerns lead the AI conversation
Concerns around data sovereignty and technology use are shaping how digital tools are evaluated and deployed. This is especially relevant in markets where geopolitical sensitivities are influencing technology choices and procurement decisions.
Over the medium term, digital investment is likely to intensify because the productivity challenge is becoming harder to ignore. However, the region is still some distance from seeing AI as a true substitute for specialist expertise.
AUTHOR
Sumit Mukherjee, Regional Real Estate Lead, Asia
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