How city-states manage costs

Construction in Singapore has been booming since the pandemic.

Several mega-projects are underway, with the $8 billion Las Vegas Sands development and Changi Airport’s new terminal both due to break ground in 2025. Another major public sector project is Tengah General and Community Hospital, which will add 4,000 patient beds by 2030.

Singapore’s Building and Construction Authority (BCA) in January predicted construction demand in the island nation would reach up to S$53 billion (about $42 billion) this year, a 15% increase from its previous forecast.

“The construction industry boomed after the coronavirus pandemic, and we haven’t looked back since then,” Alex Saez, partner and managing director for APAC at engineering consultancy Kandal, told CNBC.

For construction contractors, getting the job done means finding the right people, collaborating with developers, and using new technology, with one consultant saying some companies are experiencing a “digital renaissance.”

While the building boom is good for the economy, it also comes with challenges as Singapore’s construction costs consistently rank among the highest in the world.

Construction consultants Turner & Townsend predicted in an email to CNBC that costs could rise by up to 5% this year due to supply chain disruptions for products like cement and ready-mixed concrete, long lead times for plumbing and electrical systems, and rising prices for the semiconductors needed for those systems.

And on top of general labor shortages, the market for so-called PMET roles (professionals, managers, executives, technicians) is “significantly tighter” in Singapore, said Khoo Ze Boon, managing director for Singapore at Turner & Townsend.

“Capacity gaps continue to impact schedule and quality, especially for specialized subcontractors on large projects,” Koo told CNBC via email. To address this, BCA plans to launch additional training programs for project managers later this year, he said.

There is also a trend of “double-hatting”, where workers are trained to take on additional responsibilities, said Natalie Ong and Seng Wan Lin, analysts at CGS International Securities Singapore.

They predict that contract bookings will continue to be strong in 2026, followed by “four years of construction order growth.”

“Some companies are adapting to the challenges of labor shortages by cross-training (or double hating) employees, allowing them to perform multiple jobs with fewer workers,” Ong & Seng said in an email to CNBC. For example, they say engineers are trained to use technology that minimizes repetitive tasks, meaning they can focus on “doing.”

Singapore-based contractor Soilbuild is transitioning from labor-intensive activities to “high-value, high-specification industrial buildings,” CEO Han Leng Lim told CNBC.

In addition to the use of prefabrication to assemble building parts off-site, Soilbuild expects to see greater adoption of technology such as enterprise risk management systems “to further drive cost efficiencies,” Lim said.

CGS analysts say construction companies are turning to technology to address the skills gap.

Building maintenance company ISOTeam is already using drones and AI to inspect building facades for defects, and is developing a drone that can clean and paint exteriors, reducing the need for scaffolding and minimizing the risks of working at height.

And while investing in such technology will be costly, it should ultimately “result in improved revenue,” Ong & Seng told CNBC.

Starting in April, Singapore’s BCA will offer new subsidies to small and medium-sized enterprises to invest in technologies such as robots and automation, which can help them achieve “up to 50% headcount reductions”. The BCA also requires companies to improve their digital capabilities, such as contract management and regulatory approvals.

Singaporean companies are using startup OpenSpace’s computer vision technology to track construction projects and PlanRadar’s software for scheduling and defect tracking, with both companies reporting increased business in the region in emails to CNBC.

Turner & Townsend’s Khoo says it’s not enough for companies to simply implement new digital tools. He told CNBC that many companies need to “rethink how technology supports their commercial goals.” “Some may be experiencing a kind of digital renaissance that reshapes operating models,” he said.

Legend Robot makes machines that can spray putty and latex paint on the interior walls of residential buildings, as well as robots that can sand floors and lay tiles. Jason Liang, Legend Robot’s marketing director, said that while an average human worker can paint about 200 square meters a day, one of the company’s robots can paint up to 1,500 square meters each day, making it more than seven times more productive.

The company has operations in Singapore, China, the Middle East and Europe, and its machines cost about $70,000 for a 3.3-meter-tall latex paint spray robot, up to about $120,000 for models that can cover larger areas, Liang told CNBC. “Demand is increasing in multiple countries,” he said.

Despite billions of dollars being poured into new projects, building activity has not yet reached its peak. Analysts at CGS International upgraded their forecasts for the construction industry in January, describing a “prolonged upcycle” and predicting that contractor profits would peak in the 2028-29 financial year, versus the previously expected high in 2027-28.

According to a Jan. 23 research note, CGS expects earnings per share for the stocks it covers to increase by 16% to 41% from 2026 to 2028.

In addition to this, the city-state’s master plan for the next 10 to 15 years will see new parks, residential areas and a subway line become part of the landscape. But with land in short supply in Singapore, “decisions about what to build and what to preserve are becoming increasingly complex,” Saez told CNBC.

The higher the construction cost, the higher the cost of living. Jonathan Dennis Jacob, director of Singapore property consultancy Sistri, said new privately built homes had become very expensive. Singapore topped the list of most expensive cities for wealthy people last year.

But construction projects, especially new infrastructure, tend to be delivered on time and on budget, Dennis Jacob said. This is partly because the government is focused on the long-term, so projects are “driven by real needs rather than political agendas,” he said.

For Wynn Kam, a director at architecture firm Moreau, the city-state is not just using construction as a way to address housing and infrastructure shortages. “Singapore has moved beyond just ‘architecture’ to ‘sculpturing and greening’ the city,” he told CNBC.

Charu Kokate, senior partner at Safdie Architects, also said the government has taken great care to ensure that the new building blends in with the neighborhood, and that environmental initiatives such as rainwater harvesting are integral to the project.

“I think all of this effort to make everything livable and comfortable for people is unique here. You don’t see it anywhere else,” Kokate said.