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However, this expansion is placing immense pressure on the supply chain, with concerns over whether the sector can meet capacity demands while maintaining cost and schedule discipline.

It may be that something has to give as data centre construction is expected to grow immensely the next five years.

Europe prepping for explosive growth in data centre capacity

According to UK-based construction consultancy Rider Levett Bucknall鈥檚 (RLB) latest , which includes surveys of European contractors and builders, commissioned capacity across Europe has surged nearly 300% since 2023, with operators expecting to commission an average of 47MW in 2025. This is more than twice the average in last year鈥檚 survey and reflects a broader industry shift toward hyperscale developments.

Stephen Byrne, director of business development, data centres at Ireland-based Mercury Engineering, notes that retrofitting existing facilities is becoming a significant trend, with 66% of operators planning to retrofit at least a quarter of their data centre estate within the next five years.

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鈥淲e believe there will be a lot of retrofitting activity in existing facilities over the next five years,鈥� Byrne says.

AI and machine learning are key drivers of this growth, with 48% of industry professionals citing AI as the greatest demand driver for data centres in the next five years, surpassing cloud computing.

The impact of AI is being amplified by increased private equity investment, which has intensified demand for construction materials and infrastructure 鈥� 63% of respondents agree that private equity investment is putting additional strain on resources.

Europe is not alone: the US and global outlook for data centre construction

While RLB鈥檚 report focuses on Europe, similar challenges and trends are playing out in North America.

According to commercial real estate services and investment firm Coldwell Banker Richard Ellis (CBRE) and its , the US market is seeing unprecedented demand, with record-low vacancy rates and hyperscale providers pre-leasing new capacity years in advance.

Much like across the pond, power constraints are a growing concern, particularly in major hubs like Northern Virginia, Phoenix, and Dallas, where grid access limitations were strained prior to high-tech construction growth.

And there are some signs that hyperscalers are starting to slow their rollout of data centres. Earlier this month, Microsoft鈥檚 president of its cloud computing division, Noelle Walsh, admitted that it was 鈥渟lowing or pausing鈥� early stage projects as it makes 鈥渁djustments to its programme鈥�. Nonetheless, Microsoft is still expanding to 350 data centre facilities across 60 countries worldwide.

The Uptime Institute 鈥� a US-based IT service management firm 鈥� released its , and it echoes many of RLB鈥檚 findings, with power availability, cooling, and sustainability ranking as top industry concerns. While SMRs are still in early discussion stages in the US, nuclear energy and renewable PPAs are gaining traction as data centre operators seek low-carbon, high-reliability power sources, the report adds.

Supply chain struggles to keep up with global data centre demand

Cross-laminated timber is placed for a Microsoft data centre under construction in northern Virginia. (Image courtesy of Microsoft)

While demand accelerates, the supply chain is under strain.

About 70% of operators and contractors in Europe believe the supply chain is struggling to meet demand, and 53% fear the sector will not be able to build enough capacity to keep up, according to RLB鈥檚 report. Byrne warns that hyperscaler centres and their primary contractors will likely receive preferential access to materials, while newer entrants may struggle with competition and price pressures, creating a lopsided environment that favours giant firms.

Nancy Lamb, a solicitor specialising in data centre construction at arch.law, highlights a shift in supply chain dynamics: 鈥淐ontractors used to take on a lot of the risk inherent in employer鈥檚 data centre design. Now they are saying, 鈥業 don鈥檛 need to take that risk anymore鈥�.鈥�

As a result, developers must take greater responsibility for ensuring their designs are construction-ready and engage contractors earlier in the process, RLB suggests.

The power and cooling challenge of large data centres

A Meta data centre under consruction in Arizona, US. (Image: Adobe Stock)

And as AI workloads increase, so does power density. 73% of respondents to RLB鈥檚 report say demand for power density is growing, and 62% believe limits on grid access will disrupt future data centre construction.

To address power concerns, 73% anticipate small modular reactors (SMRs) will become a widespread power source within 15 years. Several designs for commercial SMRs are in development but so far, only Russia and China have built operational plants.

There are signs, however, that data centres could prove the catalyst for the growth in the construction of SMRs. The US government has identified 16 federal sites where data centres and energy generation projects could be co-located, aiming to accelerate artificial intelligence (AI) infrastructure and boost domestic energy production. The Department of Energy (DOE) announced the initiative earlier this month, with plans to form public-private partnerships and begin operations by the end of 2027, according to Reuters Events, as reported by .

Electricity demand is set to double in the US from 176 terawatt-hours (TWh) in 2023 to up to 580 TWh in 2028, driven by data centre demand and the Trump administration is putting nuclear at the heart of its strategy to meet energy demand.

In the UK, Rolls-Royce recently submitted its final tender in a competition to build SMRs in the country, with a winner due to be announced this spring.

And South Korean firm Samsung C&T鈥檚 engineering and construction group signed a memorandum of understanding to develop SMRs in Estonia - the latest in a series of such agreements in Europe. 

Cooling is another major consideration, with operators expecting 61% of their estate to be liquid-cooled by 2030, according to RLB鈥檚 report.

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However, progress has been slow, with only 40% expected to achieve this in 2025, down from previous expectations. The industry remains divided on the best cooling approach, with rack-based immersion cooling (33%) and direct-to-chip cooling (24%) being the most favoured solutions.

Byrne notes the sector is at an inflection point: 鈥淚 can鈥檛 tell you how many jobs we鈥檝e seen change to liquid cooling over the past six to nine months.鈥�

However, with no established industry standard, construction planning remains uncertain, the RLB report notes.

Rising costs and labour shortages

An AI created image of a typical warehouse Data Center. (Image: Cloudburst)

With surging demand comes rising costs and, in global inflationary times, this could lead new strategies from developers on contracts and labour.

Prices for key data centre infrastructure in Europe are expected to increase in 2025, with uninterruptable power supplies up 3%, battery energy storage systems up 2.8%, and generators up 2.2%. Increased labour costs, new regulatory constraints, and high demand for electrical and cooling equipment contribute to these rising expenses.

Labour shortages remain a critical issue, particularly for general contractors (GCs) and mechanical and electrical (M&E) specialists.

Microsoft pauses construction on two parts of US$3bn US data centre project Additional portions of a data centre build in Wisconsin are on 鈥榩ause鈥�, the tech giant said

鈥淓very link in the supply chain needs people, whether you鈥檙e erecting steel, pulling cables, or installing generators,鈥� says Byrne. 鈥淏ut there鈥檚 a dearth of talent across the whole supply chain.鈥�

Some operators are reconsidering their general contractor engagement strategies, with a growing interest in employing multiple contractors for different project phases to mitigate risk, which RLB notes can be effective for large builds.

Planning a strategic response to supply chain risks for high-tech construction

To navigate supply chain challenges, developers and contractors are adopting risk-sharing contractual measures, RLB finds; with 33% of operators and 31% of contractors implementing clauses that allocate financial risks.

Additionally, 41% of operators are purchasing materials directly to secure supply chains.

However, only 19% have adopted vendor-managed inventory agreements, an approach that could mitigate risks related to long-lead-time electrical equipment.

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鈥淗aving a standardised concept design locks in your delivery times,鈥� says Timo Pohjanpalo, co-founder of Hyperco, a Finnish real-estate development company, 鈥渂ut it also reduces your flexibility to give the customers what they want. You can be too rigid.鈥�

Operators are also leveraging technology for supply chain tracking 鈥� 44% report using digital tools to track suppliers and assets, and nearly 30% conduct detailed supplier reviews to ensure financial stability and project viability.

Future-proofing the data centre construction industry

Ensuring long-term success in data centre construction will require strategic planning, collaboration, and technological adaptation.

RLB鈥檚 experts recommend a multi-faceted approach:

• Retrofitting existing sites to meet AI-driven power and cooling demands
• Exploring alternative energy sources beyond grid power, including solar, SMRs, and microgrids
• Optimising supply chains through vendor diversification and direct material procurement
• Investing in digital tracking for real-time supply chain insights
• Prioritising adaptable designs that accommodate future computing paradigms

Nikki Venetsanakis, RLB鈥檚 Head of Advanced Tech, summarises: 鈥淲ith demand growing faster than expected, delivering projects on time and within budget requires a strategic, proactive planning approach. Innovation and collaboration鈥攑articularly through early supplier engagement鈥攚ill be key to ensuring scalable, sustainable infrastructure for the future.鈥�

The data centre industry is booming, but its future depends on how effectively the supply chain, workforce, and energy infrastructure can keep pace.

In a fast-evolving sector, resilience and adaptability will determine success.

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