Tender prices
Price rises continue
Tender prices for data centre construction projects are expected to rise at a constant rate in the coming years.
58 percent of respondents to our survey reported rises of 5 to 15 percent over the past 12 months, with a further 22 percent reporting more than a 15 percent increase. The majority expect tender prices to continue rising at the 5 to 15 percent rate over the next 12 months, but about a third of respondents anticipate rises might slow to around a 5 percent increase.
Globally, the overall average year-on-year cost increase across the 2024 index is nine percent, compared to six percent in 2023. Our 2024 index considers the current average cost per watt to build in 50 key data centre locations globally.
Figure 1
What has the average percentage change in data centre construction tender/bid prices been in your region in the past 12 months?
Figure 2
What percentage change are you expecting within the next 12 months?
Figure 3
Data centre cost index 2024 – index scores and US$ per Watt
It is worth noting that widespread design and cost analysis is currently underway on many data centre programmes to implement liquid cooling technologies for increased densities. These design changes and subsequent costs are not included within this year’s publication, which represents completed or live builds over the past 12 months. They will likely impact the 2025 results and beyond.
Global demand
Demand outstrips supply
Global demand is consistently outstripping the capability of supply chains and regions to deliver, pushing up prices, especially in markets with limited labour and contractor pools. Several core markets currently have 50MW+ facilities under construction and, as construction activity has intensified, so have costs.
Singapore, for example, has risen from 5th place in 2023 to 2nd this year, driven by the continued supply-demand imbalance. Singapore remains the most power-constrained market for data centres, with low capacity and vacancy rates.
Many markets, such as Auckland, Vienna, São Paulo, Singapore, Querétaro and Cape Town have seen cost inflation on data centre projects above 20 percent – driven by low supply chain capacity.
Rising markets in the index reflect increased demand outside traditional markets that are becoming saturated. This is particularly true in Europe, where the trend for investment outside the traditional ‘FLAPD’ markets continues. Vienna, for example, is now in joint 14th place in the cost index with Jakarta.
New opportunities
Opening new markets
Five markets have been added to our 2024 index:
Bordeaux
Cardiff
Helsinki
Lagos
Lisbon
While some of these markets have been popular for some time such as Helsinki, others such as Bordeaux reflect emerging hotspots for investment and construction activity, particularly over the past 12-24 months.
Several of these locations enter the index with higher comparative costs than might be expected in general construction. This is largely due to limited existing supply chain capability and experience, needing more upfront investment and import of materials and skills. As these markets mature, costs are likely to stabilise and drop in index position.
An example of this is Lagos, Nigeria. Lagos is a new market to the index, although we have been delivering projects and seen a consistent increase in investment there over the past three years. During the last three years, we have also seen build costs stabilise and even reduce. However, costs are still unexpectedly high in comparison to other markets (when converted to USD). This is driven by specific local market conditions; almost all critical equipment is imported, there are significant import duties on materials, locally produced steel typically does not meet some of the end-user requirements and, generally, labour with data centre construction experience is expatriate labour with limited local options.
The data centre pipeline in the Nordics remains strong, where the climate and access to cost competitive renewable energy counteract challenges relating to cooling and net zero. However, getting talent to these locations continues to be a major challenge, with high dependency on an international supply chain.
As the second-largest metropolitan market in the Nordics, Helsinki is attracting more interest in the European data centre landscape, with investments by both domestic and foreign investors, and new hyperscale market entrants. Google, for example, acquires wind power in Finland under long-term contracts and recently announced it will invest a further one billion euros (US$1.1bn) into the expansion of its data centre campus in Helsinki to drive its AI business growth in Europe.
Risk mitigation
Considerations when entering new markets
It is vital to consider how to mitigate the risks of a location with less experience and maturity in data centre delivery.
Regions with existing advanced manufacturing or life sciences clusters may be easier to expand into, where the skills and supply chains from these sectors may be more easily transferred to data centre work.
A key benefit the data centre sector has is that the talent base is globally mobile, allowing for the import of the specialist expertise needed to a new market while the local supply chain is still being built up. Many data centre developers choose to establish a central Programme Management Office (PMO) to bring in global expertise while also curating and building local skillsets on the ground for the long term. This helps to direct programmes worldwide in a coordinated way, sharing global best practice from different regions, drawing on regional expertise and teams, and planning ahead to avoid bottlenecks in specialist resources.
