Industry challenges
Escalating pressures on programme delivery
Schedule is king
Cost pressures are only one dimension to the challenges currently being experienced by the data centre industry. In a sector where speed-to-market drives competitive advantage, schedule delays have been wreaking havoc on many data centre developments. For 46 percent of respondents schedule delays are more of a concern than cost or labour issues.
Respondents are more concerned by:
Schedule delays
Material prices
Labour prices
Extended lead times for materials and components have had a huge impact on construction programmes, with 95 percent of respondents reporting delays to their projects caused directly by materials shortages. Our research reveals that lead times for many pieces of major equipment have extended by 12 weeks or more.
report that material shortages have caused delays to data centre construction over the past 12 months
To what extent have lead times for key data centre construction materials changed on average
report that an increase of more than 8 weeks in lead times for key data centre construction materials
Material risks
Inability to secure materials and fabrication slots for structural steel is one of the biggest risks to many data centre project schedules. Electrical equipment such as MV switchgear and transformers has increased in price by up to 20 percent, primarily driven by the cost of copper and steel components.
“The supply chain delays have had major impacts on delivery schedules. Supply chain disruption has been significant with significant backlogs for key materials such as roofing insulation, steel, and timber. But the most significant impact has been seen in extended MEP equipment lead times.”
Joe Connolly, Data Centre Lead – NAM
Skills shortages
Shortfalls in project delivery leadership persist throughout the supply chain, especially senior construction managers who often don’t have the local language skills of the market. Supply and demand imbalances are leading to rising staffing costs which drive project preliminaries upwards.
Contractors in key markets are being stretched across multiple advanced manufacturing construction projects, such as gigafactories, giving them the bargaining power to demand greater fees.
We are seeing this issue in key markets that are hotspots for advanced manufacturing construction. For example, in the US mid-west the burgeoning EV manufacturing sector is increasingly a vacuum for talent - fuelling increased labour costs.
Another example is the data centre industry in Zurich, which needs to compete with the thriving life sciences sector in that region, particularly to secure construction contractors and skilled MEP sub-contractors.
agree there is a shortage of experienced data centre construction teams
Progressive procurement
Innovative and progressive procurement is key to mitigating these concerns. In some markets, tendering a better mix of international and local supply chains can help address some of the cost and schedule risks in the current market.
“For end users, forging and building upon partnerships with recognised developers with a robust supply chain is likely to be the focus during this time of economic headwinds. Contractors are competing on lower margins and so will be looking to create a shared understanding with their clients.”
Lisa Duignan, Head of European Data Centres
This needs to be balanced with early supply chain engagement and analysis. Project teams should properly understand the origin of all material components, highlighting any risks or potential dependencies on sanctioned countries, taking the impact of Russian steel prices and capacity as a case in point.
We also recommend reviewing the distribution of contractual risk on any data centre construction project. Alternative procurement methodologies or contract forms may be more appropriate depending on the project schedule and location.
Power to progress
In the midst of a growing energy crisis in many regions, power has become a significant blocker to data centre development. 78 percent of survey respondents note that delays in securing power supplies has severely impacted delivery dates.
Competing demands in the race for favourable sites with access to power may mean this challenge gets worse before it gets better.
Governments, investors and large data centre operators alike expect sustained action to drive greater operational efficiency – reducing pressures on stretched power grids and limiting environmental impact. The future may see green finance being the only finance option coming forward, requiring demonstrable, clear sustainability plans to attract new investment.
agree delays or challenges in securing power to sites have had a severe impact on data centre delivery
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