REGIONAL OVERVIEW
Australia and New Zealand
ANZ
Activity swells in secondary markets as major projects jostle for capacity
The property and construction industry in Australia and New Zealand finds itself in a difficult position of needing to react to both internal and external pressures, as geopolitical volatility meets with local headwinds and market constraints.
In Australia, to meet a growing demand for housing and social infrastructure, including in these expanding markets with less mature local construction industries, capacity is being squeezed as the supply chain and local industry attempts to be keep up.
Then there is competition from major events and new thematics, such as Brisbane 2032 Summer Olympics, AUKUS and the Data Centre buildout. As projects start to hit the market at the same time, labour and materials shortages are becoming more acute. This is leading to increasingly uneven market conditions, where pricing and procurement outcomes are diverging between capacity-constrained markets and those with more available resources.
In New Zealand, the construction industry continued to soften through the first half of 2026, although there is increasing confidence that the market has reached the bottom of the current cycle and is set of a recovery. However, uncertainty remains ahead of the General Election coming in November 2026, with potential for changes to infrastructure priorities and government spending impacting the timing and delivery of major projects.
BREAKDOWN DATA
TOP PERFORMING SECTORS
Health
Transport and mobility (Road, rail, airport and ports)
Data centres
Defence powering regional investment
- The uncertain nature of global geopolitics is also bringing with it an increased focus on regional defence capability. Australia has committed to significant new investments, including through the AUKUS agreement with the United Kingdom and the United States.
- AUKUS is driving activity in Perth and Adelaide, with naval base upgrades to host a next generation fleet of submarines.
Data Centre growth offsets weakness in the private sector
- Data centres are the top performing sector in both Sydney and Melbourne.
- A push for data sovereignty and the growth in AI adoption means Australia and New Zealand are in the early stages of a Data Centre buildout wave that is expected to gather further momentum throughout 2026 and into 2027.
- Increasing demand in the sector is stretching the region’s already (very) long lead times for specialist equipment. By example, 50% of markets in Australia and New Zealand reported that generators are typically taking longer than 41 weeks to arrive on site.
- For Australia to make the most of this data centre investment, power generation and availability also needs to keep pace, which is aiding the demand for the transition to renewables and a broader upgrade of the grid.
- Potential challenges exist should broader market activity pick up in the primary Data Centre markets, with a capacity crunch becoming an unintended limiter to activity and a potential cost multiplier - so scenario risk planning is essential.
Two-speed market emerging across the region
- Queensland and Western Australia are leading the construction outlook for non-residential activity, while South Australia is also gaining momentum.
- In contrast, Sydney, Melbourne, and Auckland are experiencing more subdued conditions, reflecting a softer pipeline off the back of narrow private sector activity.
- This divergence is contributing to uneven capacity pressures across the region, with stronger competition for resources in growth markets and sectors and more balanced conditions elsewhere.
Race to the Olympic finish line
- Brisbane is forecast to become a construction hotspot in the run-up to the Brisbane 2032 Summer Olympics, as numerous facility and transport infrastructure projects come online, which together with a significant health infrastructure investment in the region, is expected to drive costs up by 7.2% in 2026.
- The health sector remains the primary driver of activity in Queensland’s non-residential construction sector, with the AU$18.5 billion Hospital Rescue Plan progressing, including several previously deferred projects now confirmed to recommence construction in early 2026. Health and education are now the highest performing sectors in the region, ahead of sports, leisure and hospitality.
- Meeting this demand will rely on mobilising interstate resources and unlocking productivity and efficiency improvements across the construction sector, which in turn brings more pressure to the housing market and infrastructure needs.
Helping clients overcome the capacity crunch
ANZ faces unique capacity challenges for a range of historic reasons. Many contractors and sub-contractors will not routinely take work outside of their locality, in part due to the vast distances between major population centres, but also due to differences in local governance and regulations. This immobility means that some supply chains are struggling to meet the dynamic demands of growth across the region. While the Data Centres sector have focused on the larger markets of Sydney and Melbourne to date, as developers increasingly look elsewhere to unlock suitable opportunities, local contractors and existing supply chains are likely to struggle to increase capacity and capability to meet this opportunity.
The situation is made more pronounced by a combination of low unemployment and low productivity – exaggerating existing skills shortages. While targeted campaigns for skilled migration and immigration needs to be a focus for State and Federal Governments, clients also need to explore ways that they can help the supply chain to counteract and overcome these structural problems.
One key opportunity for the region may lie in the broader adoption of digital and AI solutions. A third of respondents say implementation of Building Information Modelling remains very poor – and half think that cybersecurity concerns are a major obstacle to AI integration on projects. As market bottlenecks emerge where projects compete on similar timelines, clients and the industry will need to look for ways to drive greater efficiency.
In this context, targeted AI adoption offers a clear route to improving productivity where workforce growth is constrained – particularly at the programme and portfolio level through benchmarking and smarter delivery insights, as well as through augmentation of existing project teams to drive better efficiency, value and (hopefully) outcomes.
AUTHOR
Julian Kerwood, Regional Real Estate Lead, Australia and New Zealand
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