South Korea's construction orders forecast to hit 266 trillion won this year, up 20%

Korea Construction Management Association releases second-half market outlook

Orders seen rising more than 20% from last year

Reconstruction, semiconductor factories and SOC spending to drive growth

Financial burdens, unsold units and government regulation remain risks

A construction site in central Seoul. [Herald Business DB]

Domestic construction orders in South Korea are forecast to exceed 266 trillion won ($173 billion) this year, up more than 20 percent from last year, driven by expanded reconstruction and redevelopment projects, new semiconductor factory construction and increased social overhead capital spending.

The Korea Construction Management Association presented the outlook Thursday at a forum on second-half construction market conditions held at Yonsei Severance Building in Jung-gu, Seoul.

Park Hyeong-ryeol, vice president of Blitz Asset Management, said in the keynote presentation that domestic construction orders would reach 266.6 trillion won this year, a 20.5 percent increase from the previous year. He cited the acceleration of major reconstruction and redevelopment projects and expanded plans for new semiconductor facilities as the primary drivers. Growth in public infrastructure procurement — supported by the National Growth Fund and higher SOC budget allocations — would also underpin the recovery, he added.

By client type, public-sector orders are expected to rise 24.9 percent from last year while private-sector orders grow 18.7 percent. By construction category, residential building orders are forecast to climb 27.8 percent on the back of large-scale reconstruction and redevelopment activity, while civil engineering orders are projected to jump 53.0 percent, buoyed by growth in both public and private civil works markets.

Park said the domestic construction market this year would show its best performance since 2018, but cautioned that operating conditions for construction companies remain difficult. He pointed to persistent financial cost pressures from elevated interest rates, rising unsold units in the Greater Seoul area, polarization in the pre-sale market and stubbornly high construction costs as structural risk factors. Potential government regulation of the real estate market was also cited as a concern.

Second-half 2026 construction market outlook. [Provided by Korea Construction Management Association]

Overseas construction orders are expected to contract in the short term but recover on an annual basis. Park forecast that overseas orders would reach $49.4 billion this year, a 36.5 percent increase from last year. However, as of end-May, overseas orders had fallen 67 percent year-on-year to $3.85 billion, weighed down by the US-Iran conflict and other geopolitical disruptions.

Park said geopolitical instability in the Middle East continues to weigh on overseas orders, but urged the industry to watch for the potential formation of a reconstruction market in the region and growing demand for power and operational infrastructure driven by AI sector expansion.

With investment in AI data centers and power infrastructure accelerating, he said construction companies need to move beyond a construction-only model and consider securing operational infrastructure capabilities and entering related business areas.

On the Middle East specifically, he said a large-scale reconstruction market is likely to take shape in stages, making advance preparation by South Korean companies essential.

Son Tae-hong, a senior research fellow at the Korea Research Institute for Construction Policy, presented a separate session on construction industry issues and responses for the second half of 2026, arguing that the shifts now surrounding the industry are qualitatively different from those of the past.

Son said past downturns in the construction market were driven by relatively controllable factors such as policy and financial regulation, but geopolitical risks — including wars, conflicts and tariffs — have now emerged as the central variables.

As a result, he forecast that the era of volume-driven competition in the construction industry is in effect over, with the market set to consolidate around companies that possess capital strength and operational capability.

"The construction industry has entered an era in which uncontrollable external shocks are a constant," Son said. "Going forward, what will determine a company's competitiveness is not how much it can build, but whether it has the financial resilience to endure, the foresight to see ahead and the flexibility to adapt."

He also called on the government to strengthen public-private governance by establishing emergency financial support mechanisms and an integrated crisis-management information platform.

quq@heraldcorp.com