Data center construction facing record-breaking inflation, delays

Data center construction projects face record-breaking inflation amid delays to materials deliveries and competition for skilled labor, according to research from global professional services company Turner & Townsend.

Average costs on data center projects rose 15% in 2022 compared to last year, with escalating prices for energy and key materials squeezing margins. Intense competition for labor from life sciences, gigafactories, and other large-scale advanced manufacturing facilities in North America is driving up labor costs. Some 92% of respondents reported that they are struggling to meet construction demand due to a shortfall of experienced site teams.

Supply chain woes resulting in extended equipment and material lead times are jeopardizing program completion dates, with delays of more than 12 weeks for some components. Of the 45 key markets covered in the survey, North America has five of the top ten most expensive world markets. This is prompting clients to re-evaluate their development strategies to consider building in less costly new or emerging regional markets such as Columbus and Canada.

Despite these challenges, optimism remains high in the sector with 71% of respondents seeing the sector as less susceptible to recessionary pressures than other industries.