High Demand, Power Availability Delays Lead to Record Data Center Construction

Data center construction activity across U.S. primary markets in H1 2023 increased by 25% year-over-year to a record-high capacity of 2,288 megawatts (MW), as developers responded to greater demand. However, rising costs, labor shortages and limited available power have extended project completion timelines, according to a new report by CBRE Research.

Figure 1: Total Inventory vs. Under-Construction Capacity by Primary Market, H1 2023

Source: CBRE Research, CBRE Data Center Solutions, H1 2023.

Land acquisition, permitting, design, construction, water, connectivity, generators and power are the main elements needed to build a data center. Average construction timelines ranged between one and three years from 2015 to 2020. During that period, data center developers and operators benefited from a low cost of capital, streamlined construction processes, supply chain advances and ample power availability. As a result, total data center inventory across U.S. primary markets more than doubled to 2,870 MW of capacity.

Today, power availability is more constrained, extending construction timelines by two to four years and in some cases by as many as six years. If a new electricity substation is required, delays with procuring transformers can materially impact this timeline. If new or upgraded transmission lines are required, delays ranging from one to four years will impact delivery timelines. Backup diesel generators also can take up to 90 weeks to procure.

Figure 2: Total Inventory vs. Under-Construction Capacity by Secondary Market, H1 2023

Source: CBRE Research, CBRE Data Center Solutions, H1 2023.

Construction activity in Northern Virginia, the world’s largest data center market, has increased by 284% in just 20 months. The nearly 284 MW of capacity under construction in Q4 2020, equivalent to 20.6% of existing supply at that time, jumped to 918 MW in Q2 2023, equivalent to 40.7% of existing supply.

In Chicago, under-construction capacity has surged by 508% over the past three years to 205 MW in Q2 2023. Prior to Q4 2020, under-construction capacity ranged between just 5.7 MW and 37 MW, with healthy supply chain dynamics and power availability.

In Dallas-Ft. Worth, under-construction totals increased by a whopping 1,686% to 273.3 MW in Q2 2023 from just 15.3 MW in Q4 2020. Prior to that, under-construction capacity ranged from 24 to 49 MW.

Emerging data center markets like Omaha are seeing increased construction from hyperscalers. Helping to sustain this growth, Omaha Public Power District recently approved a $2 billion plan to nearly double its generating capacity over the next decade.

Looking ahead, it’s uncertain how long these extended construction timelines will persist. But it’s clear that reducing them will depend on finding ways to alleviate power infrastructure bottlenecks and supply chain delays.