Malaysia’s data center sector is poised for continued growth, with contractors securing hyperscale mandates and an estimated MYR 13 billion ($3.26 billion) to MYR 14 billion ($3.52 billion) worth of projects expected in the first half of 2026, according to research houses tracking the country’s digital infrastructure boom.

MBSB Research said in a note on Wednesday that data center demand in Malaysia remains structurally strong, with contractors continuing to secure hyperscale mandates as part of Southeast Asia’s ongoing digital infrastructure boom, supported by robust leasing demand, cost competitiveness, and long-term client partnerships.

According to the research house, the influx of data centers into Malaysia has been a boon for the construction sector and they continue to expect Malaysia’s data center construction pipeline remains robust, with about eight major contracts worth MYR 13 to MYR 14 billion expected to be awarded by the first half of 2026, alongside five additional mechanical and electrical packages.

“This strong momentum is further supported by rising demand for digital infrastructure, following the government’s RM2b allocation to the Malaysian Communications and Multimedia Commission (MCMC) under Budget 2026 to develop a sovereign AI ecosystem,” it said.

It is noted that major construction firms, notably Gamuda, IJM, and Sunway Construction (SunCon), are capitalizing on the upward trend of data centers in Malaysia.

Their expertise in digital infrastructure and advanced Industrialized Building Systems (IBS) has enabled them to secure significant data center projects, particularly from hyperscale clients with stringent timelines.

“Channel checks with contractors revealed that they are still actively tendering for data center jobs and that the pipeline is still healthy,” MBSB noted.

Cited Cushman & Wakefield data, RHB Investment Bank also said in a note on Tuesday that Malaysia has 3,252MW of data center capacity in the pipeline until 2030.

Assuming a lower-end data center construction cost per MW for Malaysia of $6.9 million, 3,252MW of data center capacity may translate into $22.4 billion worth of construction value until 2030.

According to the research house, the ongoing Middle East tensions may enable shifts of certain hyper scalers into Asia (including Malaysia) from the Middle East.

This may be made more attractive with the onset of the Johor-Singapore Special Economic Zone, barring any other risks – namely major supply chain disruptions for artificial intelligence (AI) components.

“Hyperscalers are closely reviewing their exposure to the Middle East as geopolitical risks rise, with employee safety, business continuity and supply chain resilience now central to location decisions,” it said.

In fact, Johor rose to the top spot in the Cushman & Wakefield’s APAC DC Maturity Index, surpassing Tokyo and Beijing, according to the research house.

While the US-Israel vs Iran conflict potentially poses risks in terms of higher energy prices, which implies that data center operators may have to incur higher electricity costs in Malaysia, RHB based on its preliminary analysis, viewed that any rise in electricity costs in light of higher energy prices to still be manageable.

It noted costs to develop a data center in Malaysia are relatively affordable versus other markets.

Referring to Cushman & Wakefield’s APAC DC Construction Cost Guide 2026, RHB highlighted that Malaysia’s mid-range data center construction costs of $9.6 million per MW remains lower than that of Japan, Singapore, South Korea, Australia and Hong Kong – and only slightly more expensive than in New Zealand and Thailand.

“Even with risks of higher material costs amid potentially steeper material prices, we view that such risks may apply to other countries too as material prices are correlated with energy prices (ie oil price),” it said.

Despite near-term geopolitical headwinds impacting profit margins and a slower-than expected rollout of infrastructure projects, Kenanga Research also remained bullish on Malaysia’s construction sector, underpinned by persistent demand for data centers and sustained capital expenditure commitments from global technology firms through 2026.

“While contract awards reached near-record levels in 2024 and 2025, we maintain our RM180 billion projection for 2026, as data center development continues to be the primary growth engine alongside ongoing public sector projects,” said the research house.

It is noted that in 2025, six major land transactions involved US tech giants, with Microsoft and Pearl Computing each acquiring two parcels for data center expansion.

Hong Leong Investment Bank has also highlighted the second wave of data center project rollouts in its note on Thursday.

“One of the primary orderbook catalysts for 2026 would be the ‘second wave’ of data center project rollouts, which is anticipated to accelerate for rest of the year as campus
build-outs kick into higher gear,” said the research house.

This was followed by the data center space at MYR 2.6 billion ($650 million) orders clinched from contractors for two main data center development packages, in addition to a handful of data center electrical and substation works.

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