Singapore's construction cost inflation is forecast to jump to 4% in 2026, up from 1% this year, as the region's AI infrastructure boom strains contractor capacity and skilled labour, according to a new report by Turner & Townsend. The consultancy's latest Global Construction Market Intelligence report ranked Singapore the 55th most expensive construction market globally, with average costs of $4,437.08 (US$3,439.8) per square metre.
For professionals tracking AI for Real Estate & Construction, the findings underscore how demand for data centres is influencing project budgets across Asia.
Data centre demand strains contractor capacity
Nearly 70% of Asian markets reported tightening or severe capacity constraints for data centre projects, the report found. Investment in AI infrastructure has made the sector the region's most constrained in terms of contractor availability. "The global construction market is shifting and new dynamics are reshaping the key drivers of cost performance," said Sumit Mukherjee, managing director for real estate for Asia at Turner & Townsend.
Skilled labour shortages hit specialist trades
Nine in ten Asian markets are experiencing large or major impacts from skilled labour shortages. Mechanical, electrical, and plumbing (MEP) trades are among the most affected, with 82% of markets reporting deficits. These specialist skills are essential for building and operating data centres, creating a direct bottleneck for AI-related construction.
Mukherjee warned: "There is a very real risk that growth in the pool of skilled labour needed to build data centres won't keep up with demand, particularly in Asia where the market for these types of assets is booming."
Residential holds top spot as other sectors expand
Beyond data centres, industrial and logistics projects continue to grow as companies reconfigure supply chains and invest in automation. Residential housing remains the strongest-performing construction sector in Asia, followed by data centres, industrial and logistics developments, and office fit-outs.
Markets overheat as investment flows
Turner & Townsend classified 16 of the 29 Asian markets surveyed as "hot" or "overheating," reflecting strong construction activity driven by technology, manufacturing and logistics investments. Mukherjee said the region is entering another period of strong growth, led by data centres, industrial developments, and logistics projects, with labour expected to remain a key source of cost inflation.
Why this matters for real estate and construction professionals
Cost escalation in Singapore and across Asia will directly affect project feasibility and margins. With data centre demand absorbing specialist contractors and MEP trades, developers of other asset classes may face schedule delays and higher bids. The report signals that workforce planning and procurement strategies must account for a tightening labour market well into 2026.
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