Construction costs could spell problems for the world’s data centres

20 Oct 2021

A data centre. Image: Turner & Townsend

Costs associated with construction of data centres and concerns about decarbonisation could impact the global market.

Despite the global demand for data centres rapidly increasing, a chronic shortage of materials and skilled workers has led to construction delays and rising costs. That’s according to a report on global data centre costs by professional services company Turner & Townsend.

The company’s researchers analysed construction input costs across 44 global markets, alongside industry sentiment and insight from a survey of more than 200 data centre professionals.

The report also warned of further cost escalation to meet decarbonisation goals. In the survey, only 50pc said data centre operators have a clear route to achieving net zero, while only 40pc of respondents believe net-zero data centres are achievable in the next five years.

Demand and costs rising

The pandemic did not alter the majority (70pc) of respondents belief that the data centre industry would be “recession proof”.

An overwhelming majority (95pc) said they were positive that demand in 2022 will be even greater than 2021, as opportunities continue to rise across secondary and tertiary markets in Latin America and Africa.

The report named the most expensive markets for data centre construction. This year, Tokyo moved to first place at $12.50 per watt, ahead of last year’s top market Zurich, now at $12 per watt.

Silicon Valley and New Jersey remained tied in third place, with the cost rising to $10.30 per watt this year compared to $9.80 last year.

In Europe, Frankfurt, London, Amsterdam, Paris and Dublin saw prices stabilise or fall. Competition for data centre projects in the UK is particularly fierce, the report said, due to issues arising from Covid-19 travel restrictions and post-Brexit work permit regulations.

Dublin came in 19th place at $8.50 per watt, meaning it is cheaper than London but more expensive than other European locations such as Vienna, Madrid and Milan. A recent report by Data Centre Pricing identified Ireland, along with Portugal, Italy, Spain and Switzerland as one of the major data centre growth markets this year.

Dealing with the climate crisis

“The challenge for the global industry is how to deliver investment against a backdrop of rising material and labour costs as well as a critical decarbonisation agenda,” said Dan Ayley, global head of high-tech and manufacturing at Turner & Townsend.

“The sector needs to adopt a programmatic approach which looks holistically at supply chain capability – identifying areas of innovation in build processes and ongoing operations that improve cost and carbon performance.”

The report predicted that Europe’s data centre boom is set to continue into 2022. But it also cautioned that the climate crisis will continue to “rise rapidly up the agenda” and that it would require “careful navigation so as not to act as a limiter to growth”.

The report referenced the European Climate Neutral Data Centre Pact, a pledge by owners and operators of data centres and trade associations within the EU. The pact includes a self-regulating commitment to be carbon neutral by 2030.

This an important topic in Ireland at the moment, with EirGrid recently predicting that data centres could account for a quarter of the country’s electricity usage by 2030.

While a number of Irish politicians have called for a moratorium on data centre construction, some experts believe they could be part of the solution to Ireland’s energy crisis and others think new strategies could boost sustainability.

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Blathnaid O’Dea was a Careers reporter at Silicon Republic until 2024.