AI drives growth in global data centre construction costs

Turner & Townsend has launched the eighth edition of its Data Centre Cost Index, which provides detailed insights into the costs associated with data centre construction in 50 global markets.

The report, regarded as a key industry resource, offers an index ranking and an indication of the US Dollar cost per watt for established and emerging markets. This edition features input from 250 industry experts, providing an overview of trends, challenges, and opportunities within the sector.

The report focuses on the influence of AI and machine learning on the data centre industry and highlights issues such as power availability and supply chain constraints that are impacting the sector's growth. Turner & Townsend indicate that 92% of surveyed industry professionals see AI as pivotal for data centre operations in the near future. However, 80% of these professionals also reported delays in manufacturing or delivery of essential equipment.

The study emphasises that power availability is now a more critical factor than location when selecting sites for new data centre projects. Markets such as Auckland, Vienna, Sao Paulo, Singapore, Queretaro, and Cape Town are experiencing cost inflation above 20%, largely due to low supply chain capacity.

The report positions Tokyo as the most costly data centre market for the second year running, with costs reaching USD $14.3 per watt. Singapore has moved up to second place with costs at USD $13.8 per watt, driven by its status as the most power-constrained market globally. Zurich, Silicon Valley, and New Jersey complete the top five in the index.

Simon Kearney, Director, Data Centre Cost Index Lead for Australia and New Zealand at Turner & Townsend, commented on regional trends: "The data centre industry in Australia and New Zealand continues to enjoy exceptional growth, despite the economic headwinds and resource challenges the industry is facing globally."

He added, "Sydney is traditionally seen as the powerhouse of Australia's data centre market in terms of investment. Melbourne, however, has seen remarkable growth due to the persistent expansion of hyperscale tenants and significant investments by key players in the industry. Forecasts suggest the built-out capacity will increase by over 70% in the next two to three years."

Kearney highlighted the pressure New Zealand faces with demand outpacing supply chain capabilities, resulting in cost inflation above 20%: "Skilled labour shortages and immigration to Australia are causing notable increases in cost inflation on data centre projects above 20%."

He also noted advancements in power and cooling technologies driven by AI and machine learning: "As data centre operators seek practical solutions to improve efficiency, reduce their impact on the environment, and minimise energy consumption, priorities will shift to renewable power sources and the advancement of liquid cooling to support high IT density."

"Governments globally are realising the importance data centres play in today's society. Microsoft is partnering with Australia's Technical and Further Education New South Wales (TAFE NSW) to establish a data centre academy that will also extend its global skills programmes to help more than 300,000 Australians gain the capabilities they need to thrive in a cloud and AI-enabled economy," he mentioned.

The report underscores the growing global reach of data centre developments with new markets like Lagos, Helsinki, Lisbon, Cardiff, and Bordeaux included in this year's survey. Despite initial high costs in these markets due to limited local supply chains, Turner & Townsend expects these costs to stabilise over time.