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BusinessToday
5 days ago
- Business
- BusinessToday
Malaysia's Construction Sector Remains Resilient Amid Trade Tensions And Cost Shifts
Southeast Asia's construction sector is demonstrating robust resilience and adaptability despite prevailing global economic headwinds and geopolitical uncertainties, according to the latest Global Construction Market Intelligence (GCMI) report 2025 released by Turner & Townsend, a global professional services company. The report, which provides an in-depth analysis of construction costs across 99 markets worldwide, highlights Southeast Asia's increasing competitiveness added that while construction costs are rising in certain areas, the region is experiencing a significant surge in demand for critical infrastructure, particularly data centres, alongside a strong shift towards sustainable building practices. These combined factors are positioning Southeast Asia as an increasingly attractive destination for global investment in the built environment. Brian Shuptrine, Asia Managing Director at Turner & Townsend, commented on the findings: 'We are seeing dynamic trends across Southeast Asia, where markets are not merely navigating global economic headwinds but actively seizing opportunities for growth through recalibration of costs and demand. The region's commitment to digital transformation and sustainability, and the strategic advantages of nearshoring, are fundamentally reshaping the construction landscape. This translates into significant opportunities for clients investing in future-proof assets, particularly within the rapidly expanding data centre developments and advanced manufacturing sectors.' The report stated that the Malaysian construction sector is poised for continued growth, propelled by public infrastructure projects like the MRT3 Circle Line and Penang LRT, as well as robust private sector demand for digital infrastructure, notably data centres. While Kuala Lumpur maintains relatively low costs at US$1,354 per m², the recent expansion of the Sales and Service Tax (SST) to cover most construction work services (excluding residential buildings) introduces new cost pressures. The industry is responding by embracing digital solutions and collaborative models to protect profitability and increase competitiveness, with a gradual shift towards greener building practices like reducing embodied carbon. As for Singapore, the sector remains one of Southeast Asia's most expensive markets, with average construction costs at US$3,104 per m². Despite anticipated inflation of 3.0% in 2025 and 5.0% in 2026, construction activity remains strong, with contract awards in the first four months of 2025 up approximately 60% compared to the same period in 2024. Challenges persist with tight contractor capacity, skilled labour shortages (especially in MEP trades), and rising waste management costs, driving interest in collaborative contracting models. Meanwhile, Jakarta offers one of the region's most cost-competitive construction markets in Indonesia at US$943 per m², with a steady escalation of 3.0%. The market is gaining gradual momentum, primarily driven by strong activity in the data centre sector as Indonesia's digital economy expands. Local developers are increasingly securing large-scale data centre projects, showcasing growing in-country capabilities. However, reliance on high-quality imported materials for major projects can strain budgets. Regional Challenges and Opportunities: A significant concern across Southeast Asia is the persistent shortage of skilled labour, particularly in Mechanical, Electrical, and Plumbing (MEP) trades, affecting 90.9% of Asian markets, including Singapore, Malaysia, Indonesia, and Vietnam. This underscores the urgent need for investment in training and local workforce development to meet surging demand for green-collar professionals. Sumit Mukherjee, Managing Director of Southeast Asia and Head of Real Estate of Asia at Turner & Townsend, emphasized that while cost remains critical, the focus is increasingly shifting towards value, efficiency, and supply chain resilience. 'The abundance of materials, especially from China, offers opportunities for faster and more cost-effective project delivery in some markets,' Mukherjee stated. The report further indicates that data centers have overtaken industrial, manufacturing, and distribution as the top-performing construction sector in Southeast Asia, reflecting the soaring demand for digital infrastructure. Corporate occupier activity has also rebounded, with a modest uptick in hospitality, sports, and leisure developments as tourism recovers. Looking ahead, nearshoring trends and the escalating demand for advanced manufacturing facilities are key drivers of heightened construction activity. Markets like Vietnam and Malaysia could benefit from a potential redirection of surplus Chinese material supplies if reciprocal tariffs with the U.S. persist, which could accelerate delivery, manage costs, and boost local manufacturing capacity. However, Malaysia's recent trade policy changes, including anti-dumping duties, introduce some uncertainty regarding future costs and supply chain decisions. Turner & Townsend advises clients to prioritise upskilling domestic workforces and strengthening local supply chains to mitigate risks, improve cost control, and ensure successful project delivery in the region's dynamic and growing construction landscape. Related
Focus Malaysia
5 days ago
- Business
- Focus Malaysia
Big Three builders set to dominate DC jobs as cost pressures shift demand to Malaysia
THE KLCON index waded through a volatile first half (1H). Despite the sell-down, the sector staged a strong recovery rally of 29% from the bottom. 'We attribute the resilience to rescinded GPU restriction rules, Big Tech capex reaffirmation, healthy contract awards and good earnings performance in 1Q reporting,' said Hong Leong Investment Bank (HLIB). As at time of writing, year-to-date (YTD) contract awards have amounted to RM28.9 bil translating to a 39.5% growth year-to-year (YoY). Several notable large scale contracts that have anchored awards this year are: (i) Penang LRT Segment 1 to SRS (60% Gamuda) – RM8.3 bil (ii) KSSC redevelopment to MRCB – RM2.94 bil (iii) LRT3 VO to MRCB – RM2.47 bil. In 1H25 total DC related contracts awarded came in at RM3.3bn (-31% YoY), a slower pace when compared to a frenetic pace achieved in 1H24. Nevertheless, we attribute the temporary slow-down in 1H to timing considering that multiple hyperscale DC tenders were called during this time. Rather than seeing the impact to DC pipeline from GPU related uncertainties, from what we gather tariff induced construction costs inflation in US (CBRE: 3-5% inflation for commercial projects) led to slight reprioritisation of DC pipeline towards cheaper countries including MY. DCs aside, 2H could see more action coming from Penang LRT (subcontracts and systems package) while sizable EM road projects such as SSLR and NCH may materialise. As for the commercial segment (including residential projects sitting on commercial plots), lack of clarity on SST treatment could drag on opportunities in 3Q25 as launch plans may see deferral until SST treatment is clearer. As at time of writing, YTD contract awards have amounted to RM28.9 bil translating to a 39.5% growth YoY. Several notable large scale contracts that have anchored awards this year are: (i) Penang LRT Segment 1 to SRS (60% Gamuda) – RM8.3 bil. (ii) KSSC redevelopment to MRCB – RM2.94 bil. (iii) LRT3 VO to MRCB – RM2.47 bil. In 1H25 total DC related contracts awarded came in at RM3.3 bil (-31% YoY), a slower pace when compared to a frenetic pace achieved in 1H24. 'Nevertheless, we attribute the temporary slow-down in 1H to timing considering that multiple hyperscale DC tenders were called during this time,' said HLIB. Rather than seeing the impact to DC pipeline from GPU related uncertainties, from what we gather tariff induced construction costs inflation in US led to slight reprioritisation of DC pipeline towards cheaper countries including MY. DCs aside, 2H could see more action coming from Penang LRT while sizable EM road projects such as SSLR and NCH may materialise. As for the commercial segment, lack of clarity on SST treatment could drag on opportunities in 3Q25 as launch plans may see deferral until SST treatment is clearer. We are foreseeing a DC award cycle in 2H to be driven by multiple award decisions for DC tenders placed in 1HCY25 – this includes five multi-billion RM tenders for one US based hyperscaler. For the DC segment, we take a 'big is better' view anticipating further inroads to be made by sector's big three (Gamuda, SunCon & IJM) riding on competitive advantages such as balance sheet strength, track record (safety & execution) and integrated structure. Recent news reports of potential AI chip curb on Malaysia is concerning but remains unconfirmed, lacking actionable details. In our view, Malaysian contractors are reliant on US/Western hyperscaler names for sizable DC jobs thus mitigating uncertainties to a certain extent – to this end exemptions might be possible and remains our base case. Recent removal of SST exemption for the construction sector (from 0% to 6%) should in general be a manageable development considering most forms of contracts provide for additional costs increase as a result of changes in law (SST revision qualifies under this). Meanwhile, the continued exemption for government & residential projects will narrow range of exposed projects mainly to non-residential construction projects (28% of construction work value in 2024). Nevertheless, these projects are adequately covered by contract. Recent removal of SST exemption for the construction sector (from 0% to 6%) should in general be a manageable development considering most forms of contracts provide for additional costs increase as a result of changes in law (SST revision qualifies under this). Meanwhile, the continued exemption for government & residential projects will narrow range of exposed projects mainly to non-residential construction projects (28% of construction work value in 2024). Nevertheless, these projects are adequately covered by contract clauses, in our view. We see limited impact on DC segment considering FIDIC style contracts while insatiable demand for capacity could mitigate impact of higher build costs. We retain our OVERWEIGHT sector call anticipating sustained contract flows in 2H anchored by DCs, infra rollout and still buoyant private sector sentiments. In our view, contractors broadly can still add to orderbook from the DC segment as well as infra projects. Valuations at current levels still provide room for upside. —July 11, 2025 Main image: Linkedin
New Straits Times
19-06-2025
- Business
- New Straits Times
Malaysia construction sector set for boost before 13MP
KUALA LUMPUR: Malaysia's construction sector is expected to see an uptick in job awards ahead of the 13th Malaysia Plan (13MP), which is scheduled for tabling next month, CIMB Securities said. The firm added that the order book environment for local contractors is gradually improving as news flow on major public infrastructure projects picks up heading into the second half of this year. It noted that the focus now is on the RM17 billion Penang Light Rail Transit (LRT), the largest infrastructure project under the current administration. The system and rolling stock component, worth RM3.5 billion, received bids from several local and international companies, including Gamuda Bhd, YTL Corp Bhd, Malaysian Resources Corp Bhd and WCT Holdings Bhd. CIMB Securities said that the civil works for the Penang LRT might be reduced by between 4.0 per cent and 6.0 per cent, from RM8 billion to RM7.8 billion, after a value engineering exercise. "However, we foresee minimal downside for Gamuda as it is poised to clinch additional works worth RM3 billion under the Penang LRT, which would more than compensate for any marginal cuts to its original share of civil works worth RM5 billion," the firm said. CIMB Securities maintained its "overweight" call on the sector and projected earnings growth of 10 per cent year-on-year for 2025. On a quarterly basis, the firm expects sector earnings growth to remain on an upward trajectory in the second quarter of 2025, supported by higher construction site activities after the festive breaks in the first quarter. "Likewise, order book visibility is improving alongside the gradual rollout of big-ticket public projects and the potential award of up to six large-scale data centre facilities worth about RM2 billion each over the next two to three quarters," it added. CIMB Securities pointed out that while the new Sales and Service Tax (SST) regime is expected to have only a marginal impact on the construction industry, it could still affect low-value non-residential projects secured on thin margins. The firm estimated that about 40 per cent to 50 per cent of total project cost could be subject to SST levies. It said this could add cost pressure to low-value non-residential projects won on thin margins, especially if contractors cannot pass on the extra SST charges to financially weaker clients. It added that most basic construction materials like cement, steel, and aggregates will remain tax-exempt, as the revised SST affects only eight out of 400 building material categories. "However, we highlight that the additional SST-related levies to be imposed on steel producers may have an indirect, cascading impact on the construction supply chain, about 63 per cent of total domestic consumption, although new contract bids would be recalibrated for any subsequent hikes in steel prices," CIMB Securities said.
New Straits Times
10-06-2025
- Business
- New Straits Times
Mutiara Line LRT physical works to begin in a month or two, says Loke
GEORGE TOWN: Physical works for the Mutiara Line light rail transit (LRT) project are expected to begin in a month or two. Transport Minister Anthony Loke said it would start with piling works. He said all necessary notices, including the Notice to Proceed with the project, had been issued to the relevant parties. "Penang does not need to wait anymore… everything is done. "All issues related to the Penang LRT project, between the federal government — particularly the ministry — and the state government, have been resolved properly. "I held a meeting with the Chief Minister (Chow Kon Yeow) at the ministry last month. All outstanding matters, including letters of release from the state government and other documents, have been settled," he said when met at the Rapid Penang headquarters in Lorong Kulit this afternoon. Elaborating further, Loke said even the main contractor had already awarded packages to subcontractors. "So, construction work will begin soon — in the next one or two months. We will start seeing physical works. "This includes preparatory works such as piling. We have also requested that, once piling and construction works begin, there must be a proper traffic diversion plan in place to avoid major disruptions, especially since traffic is already a challenge in Penang. "As with any construction project, there will be some diversions and an impact on road users. What we need to do is minimise that impact," he added. It was recently reported that Econpile Holdings Bhd's wholly-owned subsidiary, Econpile (M) Sdn Bhd, had secured a RM42.82 million contract from Irama Duta Sdn Bhd to carry out bored piling and related construction works as part of the LRT project.
Malay Mail
10-06-2025
- Business
- Malay Mail
Piling works for RM10.5b Penang LRT to begin in July or August
GEORGE TOWN, June 10 — Physical works for the Penang Mutiara Light Rail Transit (LRT) project are expected to begin within the next one to two months, Transport Minister Anthony Loke Siew Fook said today. He said piling works for the RM10.5 billion project will start soon, marking a significant milestone for the state's long-awaited LRT line. 'Penang does not have to wait anymore, the project will be starting soon,' he told a press conference after inspecting the Rapid On-Demand (RoD) service here. Loke said all technical matters between the federal and state governments have been settled, including the notice to proceed and the letter of release from the state. 'I had a meeting with the Penang chief minister last month so all outstanding issues have been resolved,' he said. He added that the main contractor has also awarded tenders to subcontractors. Once piling begins, Loke said a traffic diversion plan must be in place to reduce disruptions during construction. Transport Minister Anthony Loke said on June 10, 2025 that physical works on the Penang LRT will start in a month or two. — Picture by Opalyn Mok 'We need to minimise impact to road users during construction of the project,' he said. He acknowledged that any major infrastructure project would affect traffic, but assured that mitigation measures would be taken. The 29.5km Penang LRT line will have 21 stations and connect the southern part of the island to the northeast, as well as provide a link to the mainland. On the RoD service, Loke said there are now 50 vans operating in 13 zones across the state – seven on the island and six on the mainland. He said 150 drivers have been appointed to work in two shifts and one additional shift. The most popular routes are in Tanjung Bungah and Gurney Drive, with an average of over 522 passengers daily. This is followed by George Town and the Sunway area in Seberang Jaya. 'We hope that with this service, it will encourage more people to take public transport as this provides the first mile, last mile connectivity,' he said. The fare for the Rapid On-Demand service is RM1 per route.
