Why data centre construction costs are rising around the world

Skills shortages, AI, and demand for energy are driving data centre costs up (Vladimir Timofeev/Dreamstime)
An upsurge in data centre construction in emerging markets is driving up costs, according to research from Turner & Townsend.

Its Data Centre Cost Index 2023 analyses costs from some 200 projects in 20 countries, and surveys 246 industry experts.

Longstanding hotspots still top the rankings of most expensive places to build data centres.

The top five – Tokyo, Zurich, Silicon Valley, New Jersey and Singapore – are the same five from 2022, except that Tokyo, at US$13.7 per watt, has knocked Zurich off the top spot. Zurich is now US$13 per watt.

The most striking trend is the rapid cost escalation in emerging markets.

The average cost of data centre construction globally has risen by 6% over the last year, softening slightly from 8% in 2022.

Emerging markets

But cost increases of between 11% and 22% have been seen in seven markets in Asia, Africa, and Latin America.

Jakarta ($10.5 per watt) rose to the seventh most expensive market globally for data centre construction, while Kuala Lumpur (US$10 per watt) has climbed to the 13th position.

Riyadh is a new entrant to the index with an average cost of US$10 per watt. Growth here is driven by Saudi Arabia’s investment in digital and the kingdom’s plethora of giga projects.

Labour shortages are fuelling rising costs amid soaring demand: 94% of survey respondents report skills shortages and 85% report “hot” or “overheating” conditions.

Power hungry

Data centres are inherently energy-hungry, and the extra computing power needed for AI makes them even more so.

It’s no surprise, then, that 92% of respondents said access to power was now more important than location.

88% of respondents said demand for AI capacity was rising fast.


Respondents were optimistic about the sector, with 79% seeing it as recession-proof.

“Demand for data storage is booming,” said Rebecca Best, Turner & Townsend’s UK data centre lead.

She said more collaboration and investment in energy provision would help ensure the long-term sustainability of the sector.

See the report here.

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