Data centre developers squeezed by inflation and skilled labour shortages

A succession of economic headwinds have seen data centre construction projects pitted in an intense competition for resources with life science and gigafactory developers, according to Turner & Townsend.

The consultant’s report on the sector found that record-breaking inflation, alongside delays to material deliveries and shortages in skilled labour, was squeezing margins.

Data centre clients are facing project costs 15% higher than last year on average and are seeing delays of more than 12 weeks for some components.

More than nine in 10 survey respondents told T&T they were struggling to meet construction demand due to a shortfall of experienced site teams, as data centre projects compete with developers of other advanced manufacturing facilities across the world.

Competition is particularly strong in Europe and the US, while Singapore joined the 10 most expensive markets for data centre construction for the first time this year.

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

“It is becoming increasingly vital for clients to prioritise a programmatic, collaborative approach to procurement, project delivery and project controls.”

The price of electrical equipment such as transformers has increased by nearly 20%, partly due to the cost of copper and steel components, while logistical disruptions have increased the cost of freight and haulage.

According to T&T, shortages in project delivery leadership throughout supply chains – particularly in senior construction managers with local language skills – are also a major obstacle to quick programme delivery.

Despite the economic headwinds, there was confidence in the pipeline of work for the sector, with 71% seeing data centre construction as less susceptible to recessionary pressures than other industries.