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Unprecedented growth in the data center market has created enormous pressure on industry stakeholders to keep pace. The need to quickly build hyperscale data centers to support modern applications demands a fresh approach to planning and managing these projects.

At 51���� Groundbreak 2024, Sandra Benson, Vice President of Industry Strategy at 51���� Technologies, moderated a panel that brought together senior executives from key stakeholder groups in the data center construction sector. Panelists included:

• Steve Knighton
  Vice President, General Manager of Data Center Operations, Mortenson
  Builder, developer and provider of energy and engineering services
• Nancy Novak
  Chief Innovation Officer, Compass Datacenters
  Designer and builder of hyperscale and cloud data centers
• David Roberts
  Chief Data Center Officer, MasTec
  Infrastructure construction company

In this article, we’ll provide a recap of this discussion, which provided multiple perspectives and unique insights into the drivers of data center growth, unique challenges in data center construction, innovative strategies for managing speed and scale and how to strike the right balance between rapid growth and sustainability.

What is driving data center growth?

There are two primary drivers of data center growth: Artificial intelligence (AI) and cloud computing. While cloud adoption has been growing steadily for years, AI adoption has skyrocketed virtually overnight.

 “We saw AI building for a few years, but it has hit us like a tidal wave,” Nancy Novak said. “We need to learn how to pivot and change how we approach data center projects to accommodate demand.”

AI’s rapid growth has been well-documented. However, the business case for cloud computing that has existed for more than a decade ± cost-efficiency, scalability, agility and accessibility — continues to drive the adoption and expansion of cloud-based resources.

“Cloud is still growing at a healthy rate of 20 to 30 percent per year,” David Roberts said. “Now, we have this massive wave of AI, and we don’t know exactly how big that wave will be. We have to account for the foundation of cloud computing and the future-proofing of AI, which are different products that require different data centers.”

Another key factor in data center construction and density that must be addressed is power. Nancy pointed out that the U.S. has approximately 17 gigawatts of power availability, which must triple in the next decade to accommodate demand for AI and cloud computing. Achieving this goal would require an annual growth rate of about 50%.

What challenges are unique to data center construction?

The lack of a workforce is the primary obstacle to data center growth. This has ramifications that go beyond demand for AI and the cloud. In fact, the government has stated that a lack of digital infrastructure could become a national security crisis.

“We can’t press ‘pause’ on data center construction,” Nancy said. “There will be huge consequences for that. We have to figure out the workforce conundrum.”

The primary reason for the workforce shortage is the specialized expertise required to build a modern data center. Although a data center may look like a warehouse on the outside, a data center is built very differently for a much different purpose than any other commercial facility.

“You’re building a mission-critical system that’s designed to not go down,” Steve Knighton said. “As data centers become more advanced, the systems become more complex. An entire data center campus is built to operate like one chip, one processing unit. This can throw off contractors who typically start with steel and concrete. With a data center, you start with copper and electrons and flow outward until you build the box around it.”

David Roberts said a colleague who is an electrical engineer referred to today’s data center construction model as Revenge of the Nerds. Traditionally, a typical building had an 80-20 ratio between brick and mortar and mechanical, electrical and plumbing (MEP) systems. With a data center, the opposite is true. The increased emphasis on MEP systems changes procurement and project management.

The complexity of today’s data centers has also created a constantly moving target in terms of power, location, size, equipment, modularity and other variables.

 “A couple years ago, I was working on [data center] jobs that were two acres with a building. In the blink of an eye, it went to 200 acres. Another was announced that will be 2,000 acres. The size growth in just a couple years is staggering," said David.

Strategies for Efficiently Managing the Speed & Scale of Data Center Construction

The need to quickly complete data center construction projects to meet demand for AI, cloud computing and other applications is forcing a change in data center construction contracting models and delivery mechanisms. Industry stakeholders must develop innovative strategies for overcoming labor shortages, increasing efficiency and agility and optimizing the supply chain.

“In a design-build model, everyone typically has what I call a mature set of bridging documents at the ready,” Nancy said. “We might look at design assist to site adapt, but we already have a product that we like and don’t want to break our footprint. Because of the speed to market, we have to buffer our schedule to order equipment out front.”

To meet aggressive construction deadlines, the general contractor must order equipment in advance and store it at a location that allows for efficient deployment to a project site when needed. As a result, the general contractor absorbs the cost of storing the equipment instead of paying a subcontractor’s markup.

At the same time, MEP labor represents the most significant risk at a data center construction project site. Data centers are often built where there is access to power, even if there is no labor force. In a design-build model, most labor risk shifts to the general contractor.

However, process integration among stakeholders and the manufacturing of data center components could help address speed and scale requirements, as well as labor shortages.

“We’re constantly looking for ways to remove work from the project site by creating integrated skids or manufacturing prefabricated components,” Steve said. “If we can manufacture lineups and send them to sites, we can get far ahead of that labor pinch. There are huge opportunities with the repeatability of a data center.”

A deeply coupled supply chain with close collaboration among developers, general contractors and specialty contractors is also essential to being able to keep projects on schedule and adapt to circumstances on the ground.

“We still need to be able to operate surgically on the jobsite,” Nancy said. “At Compass, we don’t spread our supply chain thin or look for other options when a partner can’t fulfill our wishes. We may seek to add partnerships to increase capacity, but with a deeply coupled supply chain, there’s a lot of loyalty involved.”

Given the heightened pressure for speed, scale and sustainability, demanding more from partners will only make the construction process more difficult.

“You can push harder on the gas, or you can reduce friction in the supply chain,” Steve said. “To work with the speed you need and reduce strain on the workforce, you have to carefully vet and choose your supply chain partners and bring everyone together. When you’re ready to hit ‘go’ on a project, your supply chain will be ready.”

Close collaboration will also help eliminate redundancy and unlock higher levels of return. Innovative organizations are embracing multi-trade integration and advanced technology platforms to capitalize on latent capacity for growth.

“The irony is that we think of data centers as highly complicated, but they’re simple in many ways,” David said. “It’s like a big industrial building with a Lego set inside. We have to rethink these projects and approach them differently.”

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Balancing Rapid Growth with Sustainability

Demand for hyperscale data centers while dramatically increasing access to power underscores the need for cleaner energy sources.

“We can’t just have Tier 2 diesel generators spewing hundreds of hours-worth of smoke in the air,” Nancy said. “We have to pivot from that, and there’s not one answer right now. In some places, you can’t get permits because generators don’t meet EPA standards, but if you use HVO (hydrotreated vegetable oil) fuel, you do help tremendously. Even when you find a new solution tomorrow, you’re still have thousands of generators burning diesel fuel. Steps have to be taken to address the backend and the future.”

When an audience member asked about small modular reactors (SMRs) as part of the power solution, panel members expressed cautious optimism about nuclear power.

“I think [nuclear power] is inevitable,” David said. “It’s fast, mobile and clean, and it generates a lot of power. There are a lot of positives but stigmas need to be overcome. There will be a tipping point. I’m not sure if that’s one, two or three years out. There has been smart money investment into SMR solutions and I think you’ll see regulations change, too.”

While cost and regulations are an obstacle to nuclear power adoption, the ability to recycle and reuse nuclear fuel rods can help overcome these hurdles.

“What gives me hope is recent permitting of recycled rods that are being turned into fuel,” Steve said. “This will allow us to recycle and reuse existing rods that are sitting around and generate carbon-free energy, which we badly need.”

Exciting Solutions for Exciting Times

Demand for building large, hyperscale data centers — and building them quickly — will only increase. Collaboration and openness to new models for solving today’s data center construction challenges are essential to meeting demand for growth. All three panelists are enthusiastic about what lies ahead.

“It’s exciting to be in an industry that’s literally building solutions that create solutions,” Steve said. “When you read about what AI can do in pharmaceuticals, healthcare and energy, this is the industry that builds the capability to solve these problems for humankind.”

“I love being on the tip of the spear for the Fifth Industrial Revolution because this is going to make lives better,” Nancy said. “Let’s focus on our workforce because the last thing AI is going to replace is the person with the tool in their hands. We need to help the construction industry get better, safer and more diverse.”

“I would just say to buckle up,” David said. “It's going to be a fast and furious ride, like nothing we have seen in our careers. There's going to be a very aggressive runway over the next eight to 10 years, possibly longer, and it's super exciting.”

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