Kuala lumpur: Malaysia’s construction sector is poised for an upswing in data centre contract awards in the second half of the year, spurred by multiple tenders submitted in the first half of 2025.
According to BERNAMA News Agency, the sector is set to see significant activity, with five multi-billion ringgit tenders already submitted for a US-based hyperscaler.
A hyperscaler refers to a large-scale cloud service provider offering expansive cloud computing and data services to businesses. HLIB emphasizes a ‘big is better’ philosophy for the data centre segment, forecasting major advancements by leading firms like Gamuda Bhd, Sunway Construction Group Bhd, and IJM Corporation Bhd. These companies are expected to leverage competitive advantages such as robust financials, proven safety and execution records, and integrated corporate structures that include their own supply chains for building materials and essential infrastructure.
HLIB also addressed potential concerns regarding a rumored restriction on artificial intelligence chip exports to Malaysia, noting that this remains unconfirmed and lacks actionable details. Malaysian contractors’ reliance on Western hyperscalers for large data centre jobs may help mitigate related uncertainties, and exemptions are considered possible.
Beyond the data centre projects, HLIB anticipates increased activity from the Penang Light Rail Transit project in the latter half of 2025, especially through subcontracts and systems packages. Infrastructure projects in Sabah and Sarawak, including the Sarawak-Sabah Link Road and the Northern Coastal Highway, are also expected to move forward.
In the commercial segment, uncertainties regarding the sales and service tax (SST) could affect opportunities in the third quarter of 2025. Developers might delay project launches until the tax implications are clarified. The recent increase in SST for the construction sector from zero to six percent should be manageable, as most contracts allow for cost adjustments due to legal changes. However, government and residential projects continue to benefit from SST exemptions, leaving primarily non-residential construction exposed, which accounts for 28 percent of total construction work value in 2024.
HLIB suggests that contract clauses adequately cover these projects, with limited impact on the data centre segment due to the use of International Federation of Consulting Engineers (FIDIC)-style contracts. Additionally, the persistent demand for capacity could help offset the impact of higher construction costs.