A new report from global programme manager Turner & Townsend has found that rapid growth in AI infrastructure and data centre development is intensifying labour shortages across the construction sector in Australia and New Zealand.
Rising demand from data centres, health and defence projects, along with preparations for the 2032 Brisbane Olympic and Paralympic Games, is fuelling fierce competition for skilled workers and pushing the industry toward new delivery approaches.
The Global Construction Market Intelligence report identifies health as the strongest performing sector across the region, followed by transport and data centres, with defence also showing strong growth.
More traditional sectors, including commercial office development and residential construction, continue to face weaker conditions.
Data centres are now the top performing sector in both Sydney and Melbourne, reflecting the scale of investment being driven by AI adoption and the push for data sovereignty.
Brisbane is expected to emerge as a major construction hotspot in the lead-up to the 2032 Olympics, with cost inflation in the city forecast to reach 7.2 per cent in 2026.
Across Australia and New Zealand more broadly, construction cost inflation is projected to hit 5.4 per cent in 2026, before easing slightly to 4.9 per cent in 2027.
Perth is expected to post inflation of 6.5 per cent in 2026, while Sydney and Adelaide are both forecast at 5.5 per cent.
By 2027, Brisbane is tipped to record the highest inflation in the region at 7.5 per cent.
Labour availability remains the single biggest driver of rising construction costs in the region.
The report found that Australia and New Zealand are the most labour-constrained construction markets in the world, with shortages reported in 100 per cent of the cities surveyed.
That compares with a global average of 71 per cent of markets reporting shortages, with the European Union at 93 per cent and North America at 79 per cent.
Data centres have become the most capacity-constrained sector in the region, with around 67 per cent of markets reporting tightening contractor capacity.
Demand for specialised trades is particularly acute, with 83 per cent of markets reporting shortages in mechanical, electrical and plumbing skills needed to deliver complex data centre projects.
Tiffany Emmett, Project Director and Head of Construction Economics for Australia and New Zealand at Turner & Townsend, said the shifting demands of the AI era were reshaping the industry’s cost pressures.
“The global construction market is shifting, and new dynamics are reshaping the key drivers of cost performance.”
She said the growth of the skilled workforce needed to deliver data centre projects was struggling to keep pace with demand.
“There is a real risk that growth in the pool of skilled labour needed to deliver data centres won’t keep pace with demand in Australia and New Zealand.”
Emmett noted that competition for workers was being felt across multiple fronts at once, from major sporting infrastructure to health and defence investment.
“More broadly, the region is seeing increasing competition for skilled labour, with projects related to the Brisbane Olympics up against health projects in Queensland, as well as a data centre wave across the country as a whole, and increased investment in defence.”
Despite the volatility of recent geopolitical events, the report found construction input costs have stabilised over the past year, aided by supply chain resilience built up since the COVID-19 pandemic.
Cost pressures are increasingly being driven by local and sector-specific factors rather than global shocks.
Emmett said clients with international portfolios should use the findings to reassess where they prioritise investment.
She pointed to labour availability, interest rates, supply chain capacity and digital maturity as factors now shaping project delivery success alongside cost, as the industry adjusts to an increasingly uneven and AI-driven demand landscape.
