PETALING JAYA: The construction sector is set to carry its momentum into 2026, underpinned by steady job flows and large-scale infrastructure and digital projects that are expected to keep order books expanding despite a shifting mix of awards.
Analysts see headline contract activity in the coming year broadly matching the pace of the past two years, a level considered sufficient to sustain growth rather than signal a downturn.
Hong Leong Investment Bank Research (HLIB Research) said it expects construction job flows this year to run at a similar pace to 2024 to 2025, which remains adequate to expand the sector’s orders.
The resarch house said at the centre of this view is the data centre segment, particularly large-scale hyperscale developments.
“In our view, the key anchor remains hyperscale data centres where this year could see larger campuses begin to take shape,” it noted, adding that the phased buildout sustains recurring award opportunities and a steadier annual replenishment profile – noting that tendering pace has remained frenetic.
It retained its “overweight” call on the construction sector, anticipating healthy contract flows this year anchored by infrastructure projects and sustained data centre rollouts. Its top picks are Gamuda Bhd
and Kimlun Corp Bhd.
Also positive on the sector, an analyst with a bank-backed research house noted the sector’s growth would remain supported by the robust demand for data centres from global technology firms.
“Key infrastructure projects such as Penang LRT will further lift optimism over the sector,” he said.
Beyond data centres, water infrastructure is expected to emerge as another key pillar for contractors.
HLIB Research highlighted that the water segment is another order book driver in 2026, with multiple large schemes at different stages of rollout, pointing to multi-billion ringgit projects such as the Northern Perak Water Supply Scheme, Ulu Padas Scheme, Rasau Stage 2 and Langat 2 Phase 2.
Urban transport projects are also expected to contribute incremental flows.
“The Penang LRT project should continue to generate more job flows via subcontracts, Segment 2 and systems work, with the latter two potentially amounting to about RM8bil,” HLIB Research said.
In southern Peninsular Malaysia, attention remains on cross-border and regional integration initiatives.
“Separately, 2026 should see a continued build-up of the Johor-Singapore Special Economic Zone, supported by Budget 2026’s RM3.4bil infrastructure development fund and we expect further progress on the proposed Johor Baru E-ART system,” it said.
Not all mega projects will be immediate catalysts.
The research house cautioned that Mass Rapid Transit 3 is not expected to be a material award driver this year as land acquisition will likely take up most of the year.
As such, meaningful tender reactivation and awards are more likely to be pushed beyond this year, it said.
Meanwhile, HLIB Research noted that domestic contract awards in the fourth quarter of last year totalled RM9.5bil, bringing the full-year sum to RM49.2bil, the strongest full year figure since the previous high in 2016.
Over 2024 to 2025, contractors secured RM93.4bil worth of local jobs, boosted by RM17bil flows from the data centre space.”
Recent quarters also underscored the dominance of digital infrastructure, with notable wins including data centre projects in Puncak Alam and Johor, alongside large overseas contracts.
While infrastructure awards can be lumpy, the analysts view the combination of hyperscale data centres, water projects and selected transport schemes as sufficient to keep Malaysia’s construction engines running in 2026.
