AI infrastructure boom to keep Middle East construction costs elevated: Turner & Townsend
The report says fluctuations in oil prices, higher freight costs, petrochemical input prices and potential disruption to key shipping routes could create additional cost pressures for construction projects across the region
09 July, 2026
TT
16
The Middle East is expected to record the world’s second-highest construction cost inflation by 2027 as surging investment in AI infrastructure, data centres and digital projects intensifies demand for skilled labour across the region, according to Turner & Townsend’s latest Global Construction Market Intelligence report.
The Middle East’s construction market is set to remain under pricing pressure over the next two years as governments and private investors accelerate spending on AI infrastructure, despite a stabilising global cost environment.
According to Turner & Townsend’s 17th annual Global Construction Market Intelligence report, construction cost inflation in the Middle East is forecast to reach 5.1 per cent in 2027, making it the second-highest globally behind Africa’s 7 per cent. The report suggests that while global construction cost inflation is expected to plateau, regional markets will continue to face upward pressure driven by labour shortages, energy costs and strong demand for technology-led projects.
The report highlights that the rapid expansion of AI infrastructure is reshaping construction priorities worldwide, with data centres now the most sought-after asset class for contractors. Industrial and logistics developments rank second, while renewables and clean energy are also seeing a significant increase in demand in 2026.
For the Middle East, where countries including the UAE and Saudi Arabia are investing heavily in AI ecosystems, hyperscale data centres and digital infrastructure, the trend is expected to keep specialist contractors in high demand while placing additional strain on workforce availability.
Globally, more than 70 per cent of the 112 markets surveyed reported tightening or overstretched contractor capacity for data centre developments. At the same time, 87 per cent cited shortages in specialist mechanical, electrical and plumbing (MEP) trades—critical skills required for delivering advanced technology facilities.
The report notes that labour availability has become the primary driver of construction cost escalation worldwide, overtaking materials and broader supply chain disruptions. Around 71 per cent of markets now report labour shortages, reflecting the growing challenge of sourcing skilled workers as AI-related construction activity accelerates.
Although Turner & Townsend expects global construction cost inflation to rise only modestly from 4.2 per cent in 2025 to 4.5 per cent in 2026 before flattening in 2027, it warns that the Middle East remains exposed to energy market volatility stemming from regional geopolitical tensions.
The report says fluctuations in oil prices, higher freight costs, petrochemical input prices and potential disruption to key shipping routes could create additional cost pressures for construction projects across the region.
Stephanie Marshall, managing director, real estate cost management at Turner & Townsend, said the global construction landscape is being reshaped by AI-led investment. “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 centres, while broader labour constraints, supply chain volatility and geopolitical risk are becoming more pronounced.”
Marshall added that while AI presents significant opportunities for job creation, the industry faces a growing skills challenge. “There is a very real risk that growth in the pool of skilled labour needed to build data centres 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.”
She also noted that the impact of the conflict in the Middle East on construction costs is likely to be indirect and uneven, varying according to local supply chains, energy dependence and project type.
The report further found that AI is becoming increasingly important during procurement, with 66 per cent of markets reporting that AI capability now plays a greater role in tendering and client discussions than it did a year ago, signalling that digital expertise is becoming a competitive differentiator for contractors.






















