Africa's construction sector is facing increasing pressure as the market is reshaped by rapid urbanisation, housing demand and growing AI infrastructure.
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A new report from Turner & Townsend highlights how rising demand for data centers is straining manufacturing capacity and exacerbating skilled labor shortages. At the same time, Africa's expanding cities are fueling residential and social-housing development, while infrastructure demands and limited resources contribute to rising costs in the continent's built environment.
Now in its 17th year, Turner & Townsend Global Construction Market Intelligence The report represents the definitive analysis of the global construction industry, collecting data from 112 markets in 44 countries.
Key findings of the report include:
- Residential and social housing is the best performing sector in Africa, followed by commercial offices, data centers and transport.
- Africa is expected to experience the highest cost-of-cost inflation in the world at 7.0% in 2027, followed by the Middle East at 5.1%, Australia and New Zealand at 4.9%, and the European Union at 2.8%.
- Lagos will see the highest inflation in the region in 2026 and 2027 at 18.0% and 16.0% respectively, followed by Harare at 10.0% and 15.0%.
- Harare is Africa's most expensive city, followed by Lagos, Cape Town and Johannesburg
- High cost has been cited as one of the top challenges in construction
- Data centers are the leading growth sectors in Johannesburg and Cape Town, while residential and social housing top the sector rankings in Lagos, Nairobi and Gaborone.
The increase in demand for AI infrastructure, particularly in South Africa, is raising the possibility of a serious shortage of skilled labor needed to build data centres, and requires increased training and more focused efforts to recruit the workforce needed to meet future demand.
Globally, the skills shortage in specialist mechanical, electrical and plumbing trades is particularly acute, with 87% of markets reporting a shortage of MEP trades, which are essential in tech-intensive projects. Similarly, the pace of growth in AI has resulted in the data center becoming the most disrupted sector globally when it comes to contractor capability.
Despite ranking lowest in global cost rankings, Africa is expected to experience significant local-currency cost inflation in the coming years. Lagos is projected to see inflation of 18% in 2026 and 16% in 2027, while Harare is expected to rise by 10% to 15% over the same period. In contrast, cost inflation in Cape Town, Johannesburg and Nairobi will be more stable year-on-year.
Africa is less integrated than some regions into global industrial supply chains, and this has helped mitigate the impact of conflict in the Middle East. Furthermore, rising global oil and gas prices are also making African energy investments increasingly attractive, with the abundance of liquefied natural gas in Mozambique and Namibia driving up demand and driving up costs.
Energy Investment Challenges
African markets have invested heavily in the renewable energy sector, particularly solar, wind and nuclear energy. However, availability of power for new projects is still constrained by slow approvals and transmission-line delivery. Planning bottlenecks include complex regulatory frameworks in different jurisdictions resulting in delays in approvals, which have a high impact on project delivery.
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Wendy Cerruti, director and head of real-estate for Africa at Turner & Townsend, said: “The global construction market is changing and new dynamics are reshaping the key drivers of cost performance. Demand is increasingly uneven and concentrated, including in AI-driven sectors such as data centres. This comes as shortages in key skill sets, supply-chain volatility and geopolitical risk become more pronounced.
“There is a very real risk that growth in the pool of skilled labor needed to build data centers will not keep pace with demand, including in Africa. In manufacturing, AI has the potential to be a force for good in terms of increasing demand for skilled roles, but only if the right resources are put in place to support it and the right incentives are set up to attract new labour. Africa has demonstrated its resilience in the face of the pressures of energy independence over the past few decades.
Changes in market dynamics
“The impact of the conflict in the Middle East on energy prices will be indirect and uneven, varying by geography and region based on supply-chain structures and energy dependence. However, we expect investment in diverse energy sources to continue across the continent.”
“In contrast to other markets globally, traditional sectors such as residential and social housing and office development remain the leaders in Africa due to pronounced urbanisation, although data centers are becoming a growing area of growth, particularly in areas such as Johannesburg and Lagos. These trends will bring their own pressures, with labor shortages and expanded infrastructure likely to be key challenges.
“Clients with global portfolios should use this opportunity to review international programs to prioritize the right projects based on local conditions. Decisions should consider not only relative costs, but also interest rates, labor availability and digital maturity in the supply chain.”