Australian Construction Market, Plant & Equipment Summary 2025

Building Summary for January–December 2025

In 2025, Australia’s commercial and industrial building construction market was subdued relative to the broader construction sector. Overall construction output grew modestly through the year, supported by public infrastructure, data centre and renewable energy projects, alongside a gradual easing in cost and labour pressures . However, conditions in private non residential building (offices, retail, warehouses, light industrial, etc) were softer, with fewer new projects entering the pipeline and a decline in the value of the non residential major projects pipeline over the year to November 2025^[2].

Non residential building approvals were volatile but weak in trend terms. Residential approvals over 2025 were fairly stagnant, however, the value of residential construction work continued its now two year monthly increasing trend. Conversely, the trend value of non residential work fell by just over 3% in the second half of the year, highlighting fragile demand for new commercial and industrial space^[3]. Despite this, survey evidence from the RICS Construction Monitor indicated that private non residential workloads are likely to increase over the course of 2026 with stronger headwinds expected from continued increased in material cost and skilled labour shortages^[4].

Looking at a more detailed level, greater growth is expected from logistics and warehouse facilities, data centres, and high quality CBD office refurbishments and redevelopments in Sydney, Melbourne and Brisbane^[1]. New South Wales and Victoria remain the largest non residential markets, while Western Australia showed comparatively stronger forward growth prospects within the national construction outlook^[5].

Overall, 2025 can be described as a year of stabilisation at a low base for Australia’s commercial and industrial building market, setting the stage for gradual improvement in 2026 due to financing conditions normalising and investment linked to infrastructure and the energy transition continues to flow into non residential building.

Based on ABS PPI Data^[6], we would recommend the following construction cost increases for the last 12 months:

Plant & Equipment Summary for January–December 2025

Based on Aon Valuation Services market knowledge, 2025 saw plant and equipment (P&E) prices in Australia remain elevated although they appeared to rise more slowly than during the 2021–2023 surge.

Sectors with complex mechanical, electrical and process systems saw above average P&E inflation. Healthcare, hospitals and higher acuity aged care faced sustained increases for imaging and diagnostic equipment, operating theatre systems and high spec services, with hospital case studies reporting substantial cost uplifts linked to services intensive scopes^[7]. Advanced manufacturing and food & beverage processing also remained exposed to high prices for imported process lines, stainless steel fabrication, refrigeration and automation/controls, even as some materials costs began to moderate^[8].

Energy transition and infrastructure linked categories were another pressure point. Ambitious grid and renewables plans drove strong demand for transformers, inverters, switchgear and other high voltage equipment in renewable energy and broader power and utilities projects.^[9][10] Across Aon Valuation Services work in 2025, we have also witnessed that the mining and heavy manufacturing sectors faced ongoing high costs for major mobile plant and processing equipment, with earlier spikes easing but not fully reversing. Our work has also seen increased costs across the office, education, aged care and transport & logistics sectors.

Overall, the team at Aon Valuation Services believe 2025 was a year of normalising but still elevated P&E costs. Double digit, broad based spikes receded, yet we witnessed most sectors encounter P&E costs increase by more than CPI. Based on the Valuation Services team’s weighted adjustments to ABS PPI Data^[11], we would recommend the following P&E sector cost increases for the last 12 months:

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