Construction to see more growth

THE construction industry is expected to continue to see a strong inflow of jobs moving into the new year given the massive pipeline of local infrastructure projects and an uptake in private sector projects.

Analysts and market players are confident that the sector which has seen its index increase 6% year-to-date, outperforming the benchmark index by 8% – still has legs to go.

An analyst with a local bank-backed brokerage reckons job flow trends will be strong next year, thanks to unawarded packages related to the Penang Light Rail Transit (LRT) project for the systems package (estimated at RM3bil to RM4bil) and another package for the stretch from Macallum on Penang Island to Penang Sentral on the main land (estimated at RM5bil to RM6bil).

“Other key projects to look out for in 2026 include the Johor Baru elevated Autonomous Rapid Transit (e-ART), which may cost RM6bil to RM7bil.

“Also, any potential contract awards related to the Mass Rapid Transit 3 or MRT3 project – which, in our view, could be by late 2026 – ought to be the cherry on top of the cake,” he says.

Gadang Holdings Bhd group managing director Tan Sri Kok Onn says he is positive on 2026 prospects.

“Outlook looks good with many infrastructure projects in the pipeline available for tenders,” he tells StarBiz 7.

Kok says the company is hopeful of securing some construction packages, including those involving data centres and hospitals.

Olive Tree Property Consultants founder and chief executive officer Samuel Tan says the Malaysian construction sector is projected to continue growing in 2026, though growth will moderate compared with the rapid post-pandemic years.

“The key market drivers are public and private infrastructure spending (transport, utilities, social infrastructure), technology-led construction and smart city projects, renewables and green building investments, digital transformation initiatives in project execution and management,” Tan says.

In terms of challenges, he reckons one major one facing the industry is skilled labour shortage.

There is a notable gap in technical and skilled labour, with heavy reliance on foreign workers in many segments, causing project delays, rising wages, and quality issues, he says.

Construction material prices also remain volatile due to global supply disruptions and currency fluctuations which could lead to squeezed margins and budget overruns, Tan adds.

“Adopting construction technology such as automation and digital project management has been sluggish, especially among smaller firms due to cost barriers, skills gaps, and low demand, resulting in lower productivity, inefficiency, and reduced competitiveness.”

Tan reckons there is also a need to diversify supply chains to reduce dependency on single suppliers and strengthen procurement practices.

He says encouraging green financing mechanisms such as sustainability-linked bonds will also be helpful.

Positive trend

UOB KayHian Research analysts Jack Goh and Jack Lai in their latest report on the construction sector notes that the quarterly value of construction works completed is still showing “positive reads.”

Citing data by the Statistics Department, they say the quarterly value of construction work completed in the third quarter of 2025 (3Q25) continues to trend up to RM45.4bil (plus 10.6% year-on-year or y-o-y).

This is the 16th consecutive quarterly improvement since the resumption of construction activities in 3Q21.

Furthermore, year-to-date construction work done stands at RM132.2bil, improving 13.1% y-o-y and surpassing pre-Covid-19 levels by 22%, the analysts say.

Notably, they add that the private sector remains the largest contributor with 65% of total construction works done in 3Q25 while geographically, Selangor, Johor, Wilayah Persekutuan and Sarawak continue to represent the biggest contributors, at nearly 62.1% of the total works done in 3Q25.

In its latest report released on Wednesday, TA Securities notes that as the final piece of the Klang Valley Mass Rapid Transit network, the MRT3 will deliver seamless connectivity across Kuala Lumpur and the wider Klang Valley and “ momentum is building for this estimated RM45bil-50bil mega project.”

It points out that the 13th Malaysia Plan allocates RM430bil for development over 2026 to 2030, supplemented by RM120bil from government-linked corporations and RM61bil under public-private partnerships.

On an annualised basis, this equates to roughly RM122bil of construction spending per year, supporting downstream sectors from cement to electrical subcontracting, it notes.

TA Securities says flagship projects gaining momentum in 2026 include the RM16bil Penang LRT, which began civil works in mid-2025 and will require significant tunnelling and elevated guideway contracts in the coming quarters.

It also notes in Johor, the e-ART network is set to commence station piling and depot works, unlocking “ancillary opportunities” in precast concrete, signalling systems and rolling-stock maintenance.

Also notable are the Pan-Borneo Highway Phase 2 and the high-speed rail feasibility studies between Kuala Lumpur and Singapore, which are progressing toward detailed-design stages, it adds.

TA Securities also points out that the East Coast Rail Link or ECRL, spanning 665km at a cost of RM50bil, is on track to commence operations from Kota Baru to the Gombak Integrated Terminal by January 2027.

The second phase, linking Gombak to Port Klang, is expected to follow in January 2028, completing one of Malaysia’s most ambitious connectivity projects.

Together, MRT3, the Johor Baru-Singapore Rapid Transit System and the ECRL represent “transformative” investments that will reshape Malaysia’s transport landscape, enhance regional integration and drive long-term economic growth, it adds.