Data center projects face rising construction costs
Data Center Knowledge: Data Center Developers Face Tighter Margins as Construction Costs Rise
JLL says strong AI demand is not enough to protect projects lacking power certainty, anchor tenants, and credible delivery timelines.
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Data center developers are facing pressure as construction costs rise faster than they did in previous years, with annual escalation now running between 3 to 6 percent compared to the historical 2 to 3 percent range. While strong demand for AI data centers helps some projects absorb these costs, individual projects remain vulnerable if they lack reliable power access, committed tenants, or realistic delivery timelines. Risk is highest for speculative projects without anchor customers, those facing power delays, and facilities with fixed-rent agreements that cannot accommodate cost increases. Developers can mitigate risk through phased construction that aligns spending with confirmed power supply and customer demand, early procurement of equipment with design flexibility, and bringing trade partners in early to address labor shortages in electrical and mechanical trades.
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