AI-Driven Data Centre Demand Pushes Singapore Construction Costs to 4%
Source: Singapore Business Review
AI infrastructure demand is driving Singapore's construction cost inflation to 4% in 2026, as data centre projects tighten labour supply and contractor capacity across Asia, according to a new Turner & Townsend report.
Singapore's construction cost inflation is forecast to hit 4% in 2026, up from 1% in 2025, as AI-driven data centre projects tighten labour markets and push up contractor rates across Asia. The Turner & Townsend Global Construction Market Intelligence report ranks Singapore as the 55th most expensive construction market globally, at an average of S$4,437 per square metre.
The AI infrastructure boom is reshaping construction demand patterns across the region. Nearly 70% of Asian markets reported tightening or severe capacity constraints for data centre projects, making the sector the region's most constrained in terms of contractor availability. Skilled labour shortages are hitting 90% of Asian markets, with mechanical, electrical, and plumbing trades — essential for data centre builds — among the most affected at 82% of markets reporting shortfalls.
Beyond data centres, industrial and logistics projects are expanding as companies reconfigure supply chains and invest in automation. 16 of the 29 Asian markets surveyed were classified as "hot" or "overheating," reflecting construction activity driven by technology, manufacturing, and logistics investment. The report notes that residential housing remains Asia's strongest-performing construction sector, followed by data centres and industrial developments.
Why it matters for Singapore: The data centre construction squeeze hits Singapore at a pivotal moment. The city-state has positioned itself as Southeast Asia's premier AI and cloud hub, with major investments from AWS, Google, Microsoft, and Equinix pouring into local data centre capacity. Higher construction costs could ripple through AI infrastructure project timelines and budgets at a time when Singapore is also competing with Johor, Batam, and other regional data centre hubs. The labour crunch in MEP trades is especially acute here, where foreign worker levies and dependency ratio ceilings already constrain the construction workforce. For enterprises planning AI deployments, these cost pressures may translate into higher cloud service pricing as providers recoup infrastructure build costs.