PRESS RELEASE

Appetite for AI intensifies labor shortages and skills pressures as global construction market struggles to meet demand for new infrastructure such as data centers 

A new report published today by global program manager, Turner & Townsend, reveals that the growth of AI infrastructure, including soaring demand for data centers, is squeezing global construction market capacity, adding to skilled labor shortages. This will drive rapid job creation and the introduction of innovative new construction approaches over the coming years.  

This growth is creating a two-speed construction market, where geopolitical tensions and economic challenges, mixed with workforce and supply chain constraints, are limiting investor confidence in traditional sectors such as residential and commercial development. Contractors and suppliers are increasingly focusing on tech-led opportunities, where margins are often higher, creating the need for traditional sectors to reposition and reassess commercial viabilities.  

Now in its 17th year, Turner & Townsend’s Global Construction Market Intelligence Report represents the definitive analysis of the global construction industry, with data gathered from 112 markets across 44 countries. 

 Key findings from the report include: 

• Global construction demand is highest in the data centers and industrial and logistics sectors, with renewables and clean energy recording a significant annual demand upswing in 2026. 
• Global construction cost inflation is expected to rise modestly from 4.2% in 2025 to 4.5% in 2026, before remaining broadly flat in 2027, despite the short-term impact of the conflict in the Middle East. A more stable cost backdrop should serve to encourage activity levels to rise.  
• Africa is expected to experience the highest cost inflation in 2027 at 7.0%, followed by the Middle East at 5.1%, and Australia and New Zealand at 4.9%. The European Union will see the least inflation at 2.8%. 
• Labor availability is now the primary driver of cost increases, with Australia and New Zealand experiencing the most acute labour shortages, followed by the European Union and Asia. 
• North America has the highest regional labor costs with an average hourly wage of US$79.5, followed by the European Union and Australia and New Zealand with US$75.6 and US$68.0 respectively.  
• New York (US$7,938 per sq m) remains the most expensive construction market in the world, followed by San Francisco (US$7,883 per sq m) and Geneva (US$6,985 per sq m), with London (US$6,032 per sq m) ranking in fifth place. 

Across the world, the inexorable growth of AI has ensured data centers remain the most in-demand construction sector globally. Industrial & logistics ranks in second place, driven by supply chain reconfiguration as businesses increasingly invest in automation, turn to nearshoring strategies and respond to the rise of ecommerce.  

The pace of growth in AI has resulted in data centers becoming the most constrained sector globally when it comes to contractor capacity, with over 70% of the 112 markets analysed reporting tightening or overstretched capacity. Conversely, across the hospitality and leisure, residential and commercial sectors, over 79% of markets are either balanced or seeing spare capacity. 

This is raising the likelihood of a severe shortfall in the skilled labor required to build data centers, and further fuels calls for increased training and more concentrated efforts to recruit the workforce needed to keep up with demand.  

Skills deficits are particularly acute in the specialist mechanical, electrical and plumbing trades, with 87% of markets reporting MEP trade shortages, which are essential in tech-centred projects.  

The report adds that digital transformation and AI continue to present a clear opportunity to improve productivity in construction, but progress remains slow and uneven. That being said, 66% of markets report that AI capability is now slightly or much more important in tendering and client discussions than it was 12 months ago, showing momentum is building.  

Despite the volatility created by recent geopolitical events, construction input costs have stabilized over the past year, as the increased supply chain resilience built up in the sector since the COVID-19 pandemic has limited the impacts from recent global volatility. Construction cost drivers are becoming more localized, sector-specific, and structurally embedded, rather than driven by international shocks.  

As a result, labor availability is now the primary driver for cost escalation across the global construction market and around 71% of markets report labor shortages. All markets in Australia and New Zealand are experiencing labor shortages, while the European Union exceeds 93%. In North America, approximately 79% of markets report shortages or severe shortages, reflecting workforce constraints and migration policy impacts.  

As a whole, global construction cost inflation came in at 4.2% in 2025 and is expected to increase slightly to 4.5% in 2026, before remaining broadly flat in 2027, despite the impact of the conflict in the Middle East. However, this masks a fundamental shift in the underlying drivers of cost pressure, with persistent labor constraints and exposure to energy volatility far more prominent.  

This exposure to energy markets introduces new risks, with oil prices, potential for increased transport and freight costs, and volatility in petrochemical inputs all representing significant challenges. Disruption to key shipping routes also contributes to longer lead times and greater supply chain volatility, all of which will be heightened due to the conflict in the Middle East. 

While New York remains the most expensive construction market in the world, followed by San Francisco and Geneva, with London ranking in fifth place, Africa will experience the highest cost inflation in 2026 and 2027, followed by the Middle East and Australia and New Zealand. Inflation in the UK is expected to rise steadily to 3.7% in 2026 and 4.2%in 2027. 

“The global construction market is shifting and new dynamics are reshaping the key drivers of cost performance. Demand is increasingly uneven and concentrated on AI-driven sectors like data centers, while broader labor constraints, supply chain volatility and geopolitical risk are becoming more pronounced. 

“There’s a very real risk that growth in the pool of skilled labor needed to build data centers won’t keep up with demand. In construction, AI has the potential to be a force for good in terms of job creation, but only if the right resources are put in place to support it. Additionally, the impact on energy prices of the conflict in the Middle East will be indirect and uneven, varying by geography and sector depending on supply chain structure and energy dependence. 

“Clients with global portfolios must use this opportunity to review international programs to ensure the right projects are prioritized depending on local conditions. It is not only a question of the relative cost, but also factors such as interest rates, labor availability and digital maturity in the supply chain.”  

Stephanie Marshall

Managing Director, Real Estate Cost Management

Turner & Townsend

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