Many factors influence the level of U.S. construction spending, including economic growth, vacancy rates, credit availability, investor confidence, demographics, international trade, government spending and materials prices. One of the most under-recognized drivers is data, the flow of which has generated massive demand for mission critical construction across the United States. The amassing of online services fuels one of the nation’s fastest growing construction sectors: data centers.
Data center capacity is not primarily measured in terms of megabytes or terabytes, but rather megawatts (MW) and annual electricity utilization. According to industry experts, significant changes in the cost per MW of capacity occurred during the past two years as a result of the broadening adoption of airside economization and advances in software resiliency.
Recent estimates indicate data center costs average about $15 million per MW. More specifically, the Uptime Institute estimates data center costs range from $10 million to $22 million per MW depending on redundancy. However, new data center designs are emerging that run as low as $6 million per MW. Presumably, the widening availability of designs will spur more rapid construction of data centers going forward.
In early 2007, research indicated data center growth from an electrical power footprint perspective was 14 percent year over year in the United States and 16 percent globally. At that pace, data center capacity would double every five years.
The advent of cloud computing and associated infrastructure expansion will result in another surge of data center demand. However, overall construction dollar volumes may be much flatter given recent productivity advances. According to Christian Belady, who manages data center development for Microsoft Corporation, contractors and other stakeholders can expect the construction market for data centers to be roughly $18 billion in the United States and $78 billion globally by 2020.
Data center construction plans were firming up among major U.S. corporations even while the economy remained unstable. A 2010 survey by Campos Research & Analysis on behalf of Digital Realty Trust determined a substantial portion of large North American companies intended to expand their data center infrastructure during the next several years. Participating companies were required to have a minimum of 5,000 employees or a minimum annual revenue of $1 billion.
Preferred Locations
The survey noted several U.S. metropolitan areas as preferred locations for new or expanded data centers: New York City, Chicago, Los Angeles and Dallas. Foreign locations ranking high on the list include London, Singapore, Tokyo and Paris.
Communities that successfully attract data centers have a handful of key characteristics in common. A Facebook spokesperson described why the social media company selected Rutherford County, N.C., as the destination for its $450 million data center: “The region offers a business-friendly environment; a shovel-ready industrial site with excellent access and at a good price; available and affordable utilities; access to both operating personnel and facility construction expertise ... and very helpful city, state and county governments that offered strong incentives.”
Data centers will continue to be among the leading sources of growth for contractors going forward. However, because mission critical facilities utilize significant amounts of energy, the segment is subject to regulatory risk. Legislation limiting carbon emissions or regulations rendering electricity more expensive could slow the pace of data center construction. Additionally, communities with relatively expensive electricity are less likely to attract this form of investment.