Global data center construction is entering a period of rapid divergence as AI demand reshapes cost structures, power availability, and infrastructure strategy worldwide, according to a new analysis from Turner & Townsend, a multinational professional services company headquartered in Leeds, United Kingdom.
As one of the world’s largest construction consultancies, Turner & Townsend provides program management, cost management, and infrastructure advisory services across property, transportation, and natural resources – and its newly released Data Centre Construction Cost Index 2025 signals a turning point for the industry.
The report reveals a market in which traditional cloud facilities are stabilizing in cost, while next-generation AI data centers are breaking away with higher complexity, greater density requirements, and significantly elevated capital costs. With AI adoption accelerating faster than grid infrastructure and supply chains can adapt, Turner & Townsend warns that markets are entering a phase where delays, price divergence, and regional disparities will shape global competitiveness.
According to the firm’s analysis, construction costs for conventional air-cooled cloud data centers are projected to rise 5.5 percent year-over-year in 2025, a notable cooling from the 9 percent increase reported in the previous year. This moderation reflects broader stabilization in construction markets globally, along with maturing supply chains in newer data center regions. Turner & Townsend’s Global Construction Market Intelligence Report for 2025 shows only 4.2 percent average inflation across the entire construction sector – an indicator that the data center ecosystem is settling after a period of extreme volatility.
Widening Data Center Construction Cost Gap
But the real story lies in the widening gap between traditional builds and facilities designed specifically for AI workloads. Turner & Townsend’s benchmarking – supported by data from its global Hive intelligence platform – shows that liquid-cooled, high-density AI data centers in the United States carry a 7–10 percent construction cost premium over similarly sized air-cooled facilities. These projects not only require more complex mechanical systems but demand higher electrical capacity, more sophisticated rack design, and greater engineering coordination to support the thermal needs of GPU clusters used for training and inference.
In these next-generation environments, mechanical systems comprise 33 percent of total build costs, compared with 22 percent for air-cooled designs, highlighting the shift from traditional fan-based cooling to immersion, rear-door heat exchange, and direct-to-chip liquid cooling technologies. Electrical systems remain the single largest cost driver – accounting for roughly half of total spend – reflecting the industry’s dramatic escalation in power density per rack.
Industry survey data included in the report suggests that these pressures are being felt acutely. Nearly half of respondents (47 percent) said they experienced bid or tender price increases between 6 and 15 percent in the past year, and 21 percent reported increases above 15 percent. Looking ahead, 60 percent expect further construction cost escalation of 5 to 15 percent in 2026.
The geography of cost pressure remains uneven. The world’s most expensive markets for data center construction are unchanged: Tokyo (US$15.2 per watt), Singapore (US$14.5), and Zurich (US$14.2), ranking as the top three globally. In these highly constrained regions, land scarcity, labor dynamics, and specialized contractor availability are driving persistently high pricing. Tokyo’s dominance is reinforced by the addition of Osaka to the index, signaling Japan’s emergence as a multi-hub data center market.
In Europe, markets such as Paris and Amsterdam have climbed significantly due to maturing supply chains and currency effects from a softer U.S. dollar. Both now sit at US$10.8 per watt, comparable to Portland’s pricing in the United States. Meanwhile, Madrid and Dublin have surpassed major U.S. hubs including Atlanta and Phoenix, reflecting rapidly rising demand in Europe’s expanding cloud and AI ecosystem.
Power Availability
In the United States, a major shift is underway as long-standing power constraints in Northern Virginia push developers southward. Charlotte, North Carolina, newly added to the index at US$9.5 per watt, is experiencing a surge in hyperscale and colocation development. Favorable tax incentives, grid accessibility, and lower electricity prices have drawn new investments from Digital Realty, Microsoft, QTS, Compass, and Apple. Turner & Townsend notes that this marks an inflection point: power strategy is becoming the determining factor for where the next generation of AI centers will be built.
Power availability is now the single greatest barrier to delivery. 48 percent of survey respondents identified power constraints – especially long grid connection timelines – as the primary cause of project delays. Across the U.S., UK, and Europe, utilities face competing demands from housing, manufacturing, and renewable energy deployment, forcing grid operators to prioritize connections. While governments are attempting to modernize planning rules and connection processes, progress remains slow.
In response, Turner & Townsend stresses that clients will increasingly need to consider alternative or supplemental power strategies, including on-site renewable generation, battery energy storage, or grid-independent solutions. Yet only 14 percent of survey respondents have explored such approaches. As AI workloads become dominant, the consultancy warns that dependence on traditional grid connections will present an unsustainable bottleneck.
Water use is emerging as a second major concern. Although many liquid-cooling systems operate in closed-loop designs, public scrutiny and local environmental policies are tightening. Regions facing water scarcity may restrict certain cooling configurations, pushing operators toward more efficient thermal designs that minimize environmental impact and accelerate planning approvals.
Despite these headwinds, the data center sector remains highly optimistic. 75 percent of survey respondents are already involved in AI data center projects, and 47 percent expect AI workloads to represent more than half of total demand within the next two years. The industry has seen rack power density rise by 100x in the past decade, and Turner & Townsend argues that this momentum reflects only the earliest stage of an AI-driven infrastructure revolution.
Executive Insights FAQ: AI Data Center Economics
What is driving the cost premium for AI-optimized data centers?
Higher power density, liquid cooling integration, and advanced electrical and mechanical systems push AI data center construction costs 7–10% above traditional designs.
Why is power availability the biggest factor affecting project timelines?
Grid connection queues and regional power shortages are delaying builds more than any other factor, forcing developers to seek alternative energy models or new markets.
How is liquid cooling changing facility design and cost allocation?
Mechanical system costs rise significantly, environmental considerations become more complex, and operators must integrate new thermal strategies to support GPU racks.
Why are regional cost disparities narrowing across Europe and the U.S.?
Maturing supply chains and currency shifts are balancing costs, while demand in secondary markets is rising due to power constraints in traditional hubs.
What strategic steps should operators take to avoid future delays?
Early procurement, diversified supplier networks, and exploration of on-site or hybrid power models are increasingly essential for AI-driven deployments.
