According to Turner & Townsend, a succession of economic headwinds have seen data center construction projects encounter intense competition for resources with life science and gigafactory developers.
The industry consultant’s report found that record inflation, along with delays in material deliveries and skilled labor shortages, were squeezing margins.
Data center customers are facing project costs 15% higher than last year on average and experiencing delays of more than 12 weeks for some components.
More than nine in 10 respondents told T&T they are struggling to keep up with construction demand due to a lack of experienced site teams as data center projects compete with developers from other advanced manufacturing facilities around the world.
Competition is particularly strong in Europe and the United States, while Singapore joined the top 10 most expensive markets for data center construction for the first time this year.
Lisa Duignan, Head of European Data Centers at T&T, said: “Developers are facing a perfect storm of currency fluctuations, a race for talent from other high-tech sectors, and material delays and shortages.
“It is becoming increasingly vital for customers to prioritize a programmatic and collaborative approach to sourcing, project delivery and project controls.”
The price of electrical equipment such as transformers has increased by almost 20%, partly due to the cost of copper and steel components, while logistical disruptions have increased the cost of freight and transport.
According to T&T, leadership shortages in delivering projects along supply chains – particularly among senior construction executives fluent in the local language – are also a major obstacle to the program’s rapid delivery.
Despite economic headwinds, there was confidence in the work pipeline for the sector, with 71% viewing data center construction as less susceptible to recessionary pressures than other industries.