Data centre construction costs spiral amid material and skill shortages

Data centre construction costs spiral amid material and skill shortages

The cost of building data centres has soared around the world as contractors battle with materials and skills shortages, research has found.

A report from consultants Turner & Townsend also revealed that London was in the top 10 most expensive cities for construction of the buildings that host vast IT networks.

Several contractors have spoken about the opportunities arising from increased reliance on cloud storage and the move towards working from home, which have led to greater demand for the centres. The trend helped boost TClarke’s pre-tax profit and drive Severfield’s order book to record levels.

But Turner & Townsend’s Data Centre Cost Index 2022 analysed construction input costs across 45 key markets, as well as conducting a survey of 250 relevant professionals, and highlighted the soaring price of creating data centres.

Three in four sector experts said they had seen a price rise of at least 15 per cent in the past year, with none reporting an increase of less than 5 per cent.

The scale of current industry challenges was laid bare by the report, with 95 per cent of respondents saying material shortages had hit construction timescales, and 92 per cent struggling to meet demand due to a shortfall of experienced site teams.

Structural steel availability is one of the biggest risks to many data centre project schedules, according to the research, while electrical equipment such as transformers has increased in price by up to 20 per cent.

London was listed eighth in the list of the top 10 most expensive markets for data centre construction. Zurich was top, followed by California’s Silicon Valley tech hub. Mumbai was the cheapest of the markets analysed by the consultants.

Lisa Duignan, head of European data centres at Turner & Townsend, said: “Developers are facing a perfect storm of currency fluctuations, a race for talent with other advanced technology sectors, and materials delays and shortages.

“The sector has been adapting to this challenging environment over the past 12 months. It’s becoming increasingly vital for clients to prioritise a programmatic, collaborative approach to procurement, project delivery and project controls.

“For end users, forging and building on partnerships with recognised developers with a robust supply chain is likely to be the focus during this time of economic headwinds. Contractors are competing on lower margins and so will be looking to create a shared understanding with their clients.”

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