💼 Market & Business Insight
Malaysia's construction sector is still winning record contracts, but the boom is cooling. Growth slipped to 6% in the third quarter — the seventh straight quarter of slower expansion — even as data-centre awards keep filling order books. The real question for 2027 is what comes next: renewable power for the new 30% clean-energy rule on data centres, water and grid upgrades, semiconductor plants, and work abroad in Australia, Taiwan and India.
Record awards, slower growth
The numbers tell a two-speed story. Department of Statistics Malaysia advance GDP figures released on 16 October 2026 put construction growth at 6.0% year-on-year in the third quarter, supported by non-residential buildings and specialised construction, while the wider economy expanded 5.3%. Actual GDP detail is due on 18 November.
As The Star noted on 31 October 2026, that 6% pace is down from 6.5% in the prior quarter — the seventh consecutive quarter of slower growth after the double-digit run of 2024–2025. The pipeline is still busy: ECRL Phase 1 (Kota Baru–Gombak) is targeted by year-end, Phase 2 (Gombak–Port Klang) from January 2028, and Penang's Mutiara Line LRT continues. Water upgrades and the national power grid remain live workstreams. Timing on MRT3 and the Johor Bahru–Singapore RTS is less certain, and unsold homes continue to weigh on new property launches — a cash-flow risk for smaller contractors if awards slow.
Yet contract awards are anything but soft. Citing HLIB Research's Brian Chin, New Straits Times reported on 13 October 2026 that domestic awards hit RM18.7 billion in the third quarter alone (+75% year-on-year) and RM46.4 billion for the first nine months (+17%). The industry is on track to beat the 2016 annual record of RM56 billion. Roughly RM10 billion of the Q3 haul was data-centre work — including Gamuda's three hyperscale packages in Port Dickson at a combined RM5.3 billion, Kerjaya Prospek's maiden data-centre job at RM858 million, and the MRCB–Theta Edge joint venture's RM3 billion Penang LRT systems package.
The 30% renewable rule changes the game
The data-centre wave is not ending; it is being rewired. In late October 2026, Deputy Prime Minister Fadillah Yusof told Parliament during the Budget 2027 wind-up that the government has approved a requirement for data centres to use at least 30% renewable energy by capacity or consumption. The Energy Commission is developing the framework, and operators are being encouraged toward on-site solar and self-generation.
That rule sits on top of a heavy interconnection pipeline. Reporting around the Data Centre Task Force points to roughly 5GW of additional capacity approved conditional on the 30% threshold, with about 8.3GW of data-centre capacity already in the interconnection queue. Separately, Tenaga Nasional sees around 13GW of data-centre power demand over the next three to five years.
For contractors and M&E players, the commercial hinge is Corporate Renewable Energy Supply Scheme (CRESS) infrastructure. System access charges for renewable developers remain at 14 sen/kWh rather than 18, with green users paying a separate 4 sen/kWh. DayOne's 1.5GW renewable deal with TNB, signed in June under CRESS, is an early marker of scale.
CRESS, LSS6 and a RM20 billion addressable market
A UOB Kay Hian renewable-energy note dated 3 November 2026 sketches the near-term pipeline. CRESS has drawn 11 applicants with about 3GW of potential capacity; another 500MW–1GW of CRESS is expected by December 2026. Disclosed examples include the Tenaga–DayOne 600MW arrangement, a Gamuda / SD Guthrie / Gentari consortium at 680MW, and Northern Solar's 189MW CRESS letter of award.
Large Scale Solar 6 Packages 1–2 bidding closed on 27 October 2026. The EPCC market for those packages is estimated at roughly RM10–11 billion, with awards expected in the first half of 2027. UOBKH puts the addressable renewable build for the data-centre 30% rule at about RM20 billion over five years — roughly RM5 million per megawatt across some 4GW. HLIB expects CRESS to drive renewable infrastructure and M&E work in 2027, helped by the retained 14 sen/kWh access charge and an end-2028 commercial operation deadline for relevant projects.
Johor's proposed electric Autonomous Rapid Transit (e-ART) is another possible 2027 driver; MRT3 timing remains uncertain. HLIB retains an Overweight call on the sector, with Gamuda as preferred large-cap (target price RM5.75) and Inta Bina as a small-cap pick (76 sen).
Diversify or dilute: semiconductors and overseas books
The firms already hedging the data-centre concentration risk are winning elsewhere. Kelington Group secured a RM1.8 billion turnkey hookup contract for a semiconductor wafer fab in India. Gamuda booked RM2.3 billion for Mortlake Energy Hub Stage 1 in Victoria, Australia — and, according to Apex Securities coverage in The Star on 3 November 2026, ended July 2026 with an order book of RM61.2 billion, up 61% year-on-year and well ahead of its RM50 billion target.
That book is geographically diversified: Malaysia 43%, Australia 37%, Taiwan 17%, Singapore 3%. About RM18 billion of Gamuda's RM35 billion in FY26 new wins came from newer sectors — data centres and renewables — alongside traditional rail, road and water. Roughly 90% of the order book is not yet at peak execution; 48% (RM29.6 billion) is still only 0–10% complete. Apex forecasts construction revenue of RM21.3 billion, RM26.4 billion and RM31.5 billion across FY27–FY29, versus RM14.9 billion in FY26, with data-centre margins expected to lift the net margin above FY26's 5%. Longer-dated earnings include 187.5MW Ulu Padas hydro, Northern Perak water, a proposed CRESS hybrid solar-plus-battery project with preliminary offtake above RM10 billion in project revenue, and over 5GW of renewables under development across Malaysia and Australia.
The business takeaway
For Malaysian contractors, the data-centre boom remains a powerful near-term engine — but it is no longer the whole story. Growth is moderating, power and water scrutiny is rising, and newly approved centres must meet a 30% renewable threshold. The order books that will look healthiest into 2027 and beyond will lean on CRESS and LSS6 renewable EPCC, water and grid packages, semiconductor fit-out, and selective overseas diversification where Malaysian delivery capability already travels. The winners will not abandon hyperscale work; they will build what hyperscale — and the wider economy — needs next.
Sources: DOSM advance GDP Q3 2026 (16 Oct 2026); The Star (31 Oct 2026; 3 Nov 2026 / Apex Securities); New Straits Times / HLIB Research (13 Oct 2026); Fadillah Yusof, Parliament Budget 2027 wind-up (~27–28 Oct 2026, via The Edge); Data Centre Task Force / Data Center Dynamics reporting; UOB Kay Hian RE note (3 Nov 2026).