Why data centre work is seeing unprecedented growth

Key Takeaways:

• Linesight’s latest Construction Market Insight report revealed a number of themes, including a sharp rise in data centre construction.
• Experts say much of this increase is due to the rapid emergence of artificial intelligence technology.
• These data centres are also getting larger, denser and more complex to build, requiring specialized contractors.

The Whole Story:

Artificial intelligence is poised to transform society in an unknown amount of ways at a pace that is blistering. This transformation is creating a massive new demand for construction.

Data centre facilities, which are utilized by AI and cloud service providers, are exploding in the U.S. and beginning to pick up steam in Canada. 

Global construction consultant Linesight, which works with some of the top hyperscale data centre providers in the world,  expects growth is likely to remain strong due to the increasing demand for cloud services and data-intensive applications. This was one of main takeaways from the groups recently released Construction Market Insights report for North America. 

AI is creating more demand

Padraig Leahy, vice president of Linesight in the Americas and Jonathan Scully-Lane, Linesight’s associate director in Canada spoke about the dramatic rise in demand for these centres and why the are far more complex to build than they appear. 

Leahy explained that while data centres aren’t new, the recent explosion of artificial intelligence has been creating much of the new work.

“The introduction of various AI tools has been a turbo boost for data centre requirements. Before that, it was extremely busy. And then it just took a hockey stick trajectory up,” he said. 

He noted that the density and complexity of these facilities is also growing. Clients are wanting to fit more racks into smaller spaces and draw larger amounts of power. There is also lots of overlap because AI is impacting so many parts of the economy, including life sciences operations. 

“The link between AI and life sciences is becoming more important because life sciences operate on drug development,” said Leahy. “So AI is helping with the scaling up of drug development. So they can do a lot more checking and calculations and clinical stuff in the background quicker now because of AI.”

Scully-Lane explained that there hasn’t been the same explosion in demand for AI data centres in Canada yet, but hyperscalers—large cloud service providers—are expanding, particularly out east. He is currently working on seven hyperscale facilities on the east coast with plans for many more. 

“Our schedules are tight, the work is concurrent,” he said. “It’s getting to the point where we are having to protect our general contractors a bit and ask them if they are going to be able to bid on four to six different projects. Canada has a limited number of tier one contractors with data centre experience.”

And even those that do have experience have often only have only worked on smaller, low wattage projects.

Data centre work requires skilled builders

Why is so much experience to build what is essentially a warehouse? Scully-Lane explained that the warehouse shape of the building is easy. The real challenges are the immense mechanical and electrical system requirements to power and cool what goes inside. 

The facilities require robust climate control and builders have large commissioning requirements due to the high extreme reliability needed by clients.

“You have to make sure all the equipment is interconnected and up and running. There can be no overheating,” said Scully-Lane. “Commissioning is probably one of the most onerous activities you can do within a data centre. It’s frequently underestimated.” 

He noted that data centre’s run so long without interruption that downtime is often less than one second each year. They systems must have multiple redundancies built in to ensure nothing stops even if there is an issue. Each hall is a standalone cell that can function independently if others go down. 

“It’s a multitude of huge amounts of mechanical cooling and electrical systems for such a  relatively small building,” he said. “And they’re often completed in a phase development where you have a live section operating and then the contractor is operating fitting out the other sections. You need experience in that how to do it. There’s safety, there’s massive power going in to make sure everything is safe and nobody, God forbid, has an accident.”

There is no room for error while working in a live data centre. Crews must be well versed in the sequencing, safety and design of data centre buildings making it specialized work. 

Equipment supplies are strained

The data centre boom and its equipment requirements could have an impact on supply chains. Scully-Lane and Leahy said lead time for some equipment pieces are already more than a year long and vendors are having difficulty keeping up. This includes air handling units, power distribution units and generators. 

“If you’re thinking about building a data center in two years’ time, you’ll want to start ordering your equipment for it now,” said Leahy.

Many clients have begun buying up equipment years in advance to try and mitigate these lead times, but this has its own risks. 

“Technology is moving so fast that equipment could become redundant before you know it/ YOu cannot have something sitting there for three years because three years could mean it’s redundant and there is something much more efficient.” 

The pair added that this large demand will impact other parts of the construction sector that want labour and equipment. 

Linesight’s report also touched on other key trends happening in construction: 

Macroeconomic overview: The U.S. and Canada demonstrated resilience in 2023, with the US maintaining a strong job market and Canada enjoying growth from job creation and population increase. Both countries look towards 2024 with cautious optimism, hoping for economic growth facilitated by potential interest rate adjustments in response to easing inflation. 

Inflation and interest rates: After peaking in 2022, inflation is moderating, with stable yet elevated interest rates. The construction industry anticipates possible rate reductions later in 2024, aligning with easing inflationary pressures. 

Construction sector overview: Despite challenges from high interest rates and labor shortages, certain sectors like data centers, infrastructure and high-tech industrial remain robust, driven by significant investments. Supply chain and labor issues continue to be pivotal, with the industry focusing on strategic solutions to mitigate these challenges. 

Commodities market adjustment: 2023 saw a general easing in commodities prices, offering relief to the construction industry. This adjustment is particularly beneficial for materials with high energy requirements, providing a positive outlook for future projects.