Malaysia’s data centre construction market is entering a larger and more demanding phase in 2026. From 2021 to June 2025, the government approved 143 data centre investment projects. Twenty-five projects with Malaysia Digital status received support under the Digital Ecosystem Acceleration Scheme, with approved investment reaching RM144.4 billion.
The construction pipeline is also expanding quickly. BMI, a Fitch Solutions company, estimates that about 4.6 GW of data centre capacity is planned or under construction in Malaysia. This scale shows that the market is no longer limited to a few server buildings. It now includes large digital campuses, substations, cooling plants, fibre connections, backup systems, and specialist engineering work.
Power availability is becoming a central construction issue. Data centres were using about 603 MW of electricity nationwide as of June 2025. This was around 47% of their declared maximum demand. Longer-term projections are much larger. Data-centre electricity demand could reach 12.9 GW by 2030 and 20.9 GW by 2040.
These figures change how projects must be planned. Developers can no longer select land and design the building before dealing with energy supply. Grid connections, generation capacity, renewable electricity, and power efficiency must be considered from the start.
Malaysia’s wider energy transition adds another layer. Renewable energy represented 31% of installed capacity by the end of 2025. The national targets rise to 40% by 2035 and 70% by 2050. Data-centre operators are also being encouraged to access greener electricity through market mechanisms.
Power, Water and Local Supply Chains Reshape Construction
Water is becoming just as important as electricity. Data centres need cooling systems to protect servers and keep them operating. Some extremely water-intensive facilities can require up to 50 million litres per day. This level of demand has increased scrutiny from regulators and communities.
Malaysia’s sustainable data-centre guideline now connects site selection with water availability. New projects in Peninsular Malaysia should consider locations with a Water Stress Index below 0.8. Operators are encouraged to use reclaimed or reused water and improve Water Usage Effectiveness over time.
Federal guidance is also pushing developers to prioritise rainwater, recycled water, or treated effluent for cooling. Clean treated water should be used only when alternative sources are insufficient. Water planning is therefore becoming part of permitting, engineering, and investment decisions.
This shift creates opportunities for specialised suppliers. Demand may grow for closed-loop cooling, liquid cooling, rainwater systems, wastewater treatment, water recycling, monitoring equipment, and efficient mechanical design. Construction companies will also need to coordinate energy and water systems more closely with the building programme. This is a commercial implication of Malaysia’s sustainability requirements and current project pipeline.
Local sourcing is another important change. Selangor is requiring 30% local content for new data-centre projects. The requirement covers areas such as components, coding systems, server racks, power systems, and cooling equipment. The state intends the policy to increase opportunities for Malaysian small and medium-sized companies.
The local-content target can support domestic EPC contractors, electrical specialists, mechanical contractors, equipment manufacturers, software providers, and maintenance firms. MIDA is also encouraging stronger domestic capabilities in precision cooling, power infrastructure, engineering services, and other parts of the data-centre value chain.
The next phase of Malaysia data centre construction 2026 will therefore be shaped by more than investment volume. Power, water, sustainability, local capability, and community acceptance will influence which projects move forward and how they are designed.
For businesses, the opportunity remains significant. But the strongest position will belong to companies that can solve practical infrastructure problems. Efficient cooling, renewable energy access, recycled water, grid-ready design, and qualified local supply chains are moving from optional features to core project requirements.
