Data centre construction in 2026: faster, bigger, riskier
The global data centre market is expanding at extraordinary speed, with generative AI creating a new wave of demand. We are increasingly seeing developer and contractor clients grapple with (a) faster construction programmes which leave less room for manoeuvre, (b) larger facilities which can increase power and interface challenges, and (c) a combination of supply chain constraints, geopolitical uncertainty and evolving regulation, all of which can increase the overall construction risk profile of these projects. In this article we touch on examples of these pressures at play in the UK and Singapore. There is no silver bullet in the current climate but - as always - these risks can be mitigated via clear allocation of risk, realistic programming, effective mechanisms for addressing change and delay, and high-quality contract administration.
Faster - when the programme is the risk
A defining feature of the current data centre market is the speed of construction. The commercial imperative to bring capacity online means that projects are being delivered to increasingly aggressive programmes. This is exacerbated by the speed of change in technology. As chips develop rapidly, so too do the requirements for the facilities that house them. Whilst this has been a driver for innovation with, for example, new technology developed in relation to cooling systems (including direct-to-chip liquid cooling), the pace of change intensifies the programme pressure.
Design, procurement, construction and commissioning are increasingly compressed, with limited or no float. Equipment may need to be ordered before related designs are fully developed, while construction may commence before key technical decisions have been finalised. There is also a fundamental tension between speed and certainty. Accelerating delivery may bring forward revenue, but can also increase the risk of rework, defects, coordination failures and claims for extensions of time and additional cost.
In the UK, for example, QTS is seeking to accelerate delivery of its £10 billion data centre campus in Northumberland, with plans to overlap construction phases, commence works earlier than originally planned and increase peak labour levels. The aim is to have four of the campus's ten planned buildings operational by 2030.
Bigger – Power and Interface challenges
Individual facilities increasingly require more than 100 MW of power, while electricity supply remains constrained in leading markets such as Singapore. Rather than allowing data centre capacity to expand in line with demand, the Singapore Government is adopting a ‘calibrated approach’ based on available power, water and environmental resources. Its second Data Centre Call for Application made at least 200 MW of new capacity available (which has been provisionally allocated to four operators), with applications assessed against economic, strategic and sustainability criteria.
The sheer scale and technical complexity of these projects can also increase interface risk. Large developments are increasingly procured on a disaggregated basis, giving developers greater control and potentially reducing cost, but also increasing the interface and coordination risk between the design, supply, construction and commissioning packages.
The density of mechanical, electrical and plumbing (MEP) systems in data centres often exceeds that of much larger conventional buildings. In addition, commissioning requirements are extensive given the number of integrated systems. As data centres increase in scale, so do the MEP and commissioning requirements. Likewise, as facilities get bigger, so does the potential impact if an issue arises.
Riskier - supply chain constraints, geopolitical uncertainty and evolving regulation
Compounding the risks arising from the increased speed and scale of data centre construction, data centre projects are also competing for labour (especially MEP specialists), materials and specialist equipment with major energy and infrastructure developments around the world. Power equipment can be a particular concern. Transformers, power distribution units and backup power systems, for example, can have exceptionally long lead times, creating significant cost and delay risk.
Geopolitical uncertainty can exacerbate these constraints with tariffs, sanctions and export controls affecting the price and availability of construction materials and equipment.
Data centres are also subject to evolving regulation and other requirements. For example, under the UK’s Cyber Security and Resilience (Network and Information Systems) Bill, it is proposed that data centre services will be designated as essential services with facilities with a rated IT load of 1 MW or more (10 MW for enterprise data centres) required to have appropriate and proportionate measures in place to manage risks to their network and information systems. At the same time, initiatives such as the UK’s AI Growth Zones aim to accelerate the development of large-scale schemes by reducing planning barriers and prioritising grid connections. Whilst many of these changes are positive, they bring uncertainty.
Conclusion
There is no single contractual solution to the pressures facing the data centre sector, particularly when projects are being delivered against rapidly changing technical, regulatory and infrastructure constraints. In order to reduce the risk of disputes, the focus should instead be on ensuring that the contractual framework reflects the realities of the project from the outset. That means allocating risk to the party best placed to manage it, agreeing a realistic programme, putting in place effective mechanisms for dealing with change and delay, and ensuring that obligations across design, procurement, construction and commissioning are properly aligned. Ultimately, effective risk management can depend as much on the quality of the project’s contracts and their administration as on the allocation of risk itself.
This article is published as part of The Snag List, an article series from Stephenson Harwood’s construction team considering topical issues affecting our clients and contacts across the construction industry.
