How much does it cost to build a data center, including construction of the building, and equipping the facility with power and cooling infrastructure to house server, storage, and networking equipment?
As a general rule, it costs between $600 to $1,100 per gross square foot or $7 million to $12 million per megawatt of commissioned IT load to build a data center. Therefore, if a 700,000-square foot, 60-megawatt data center were to be built in Northern Virginia, the world’s largest data center market, it would cost between $420 million and $770 million to construct the facility, including its powered shell and equipping the building with the appropriate electrical systems and HVAC components.
Dgtl Infra provides an overview of the components of building a data center, details the cost on a square footage- and megawatt-basis, and further segments the build costs for these mission-critical facilities by type (retail, wholesale, on-premises) and geography.
What are the Components of Building a Data Center?
Building a greenfield data center, including the necessary infrastructure and components used in the operation of the facility, can generally be broken down into four main categories: i) land and building shell, ii) electrical systems, iii) HVAC / mechanical / cooling systems, and iv) building fit-out. Below is a description of each of these categories, alongside their typical cost breakdown ranges:
- Land and Building Shell (15% to 20%): building shell, raised floor
- Electrical Systems (40% to 45%): electrical backup generator, batteries, power distribution unit (PDU), uninterruptible power supply (UPS), switchgear / transformers
- HVAC / Mechanical / Cooling Systems (15% to 20%): computer room air conditioner (CRAC), computer room air handler (CRAH), air cooled chillers, chilled water storage and pipes
- Building Fit-Out (20% to 25%): lobby / entrance, meet-me room (MMR), shipping & receiving area
Importantly, data center operators generally do not own any of the server, storage, or networking equipment housed within their facilities.
How Long Does Data Center Equipment Last?
Data center equipment, including generators, power distribution units (PDUs), uninterruptible power supplies (UPS), switchgear / transformers, and HVAC / cooling systems all have useful lives of 20+ years. As a reference point, Dupont Fabros, which was acquired by Digital Realty (NYSE: DLR), historically disclosed the useful lives over which the major components of its data center properties were depreciated:
|Data Center Component||Category||Useful Life|
|Power Distribution Units||Electrical Infrastructure||20 years|
|Uninterrupted Power Supply||Electrical Infrastructure||25 years|
|Switchgear / Transformers||Electrical Infrastructure||30 years|
|Heating, Ventilating and Air Conditioning||Mechanical Infrastructure||20 years|
|Chiller Pumps / Building Automation||Mechanical Infrastructure||25 years|
|Chilled Water Storage and Pipes||Mechanical Infrastructure||30 years|
|Fire Protection||Other||40 years|
|Security Systems||Other||20 years|
Notably, one component of a data center that needs to be replaced much more frequently are batteries, which safeguard facilities from power disruptions. In the event of a power outage, batteries supply power first, followed by backup generators, which take about a minute to turn on. Typically, batteries have a useful life and are replaced every 5 to 6 years.
How Much Does it Cost to Build a Data Center?
Data center build costs are best characterized on a relative basis, as measured by square footage (sqft) and megawatts (MW). This is because there are various types of data centers, such as retail and wholesale, as well as sizes of facilities, including 1-megawatt and 50-megawatt, where scale provides a build cost advantage.
Square Footage (sqft)
Below is an illustrative example of the total development cost components for a greenfield data center, based on gross square footage, which generally ranges between $625 to $1,135 per gross sqft. The two key cost groupings are those related to the powered shell and data center improvements.
Data Center – Total Development Costs Example
|Cost Component||Low Cost/sqft||High Cost/sqft|
|Subtotal – Powered Shell||$105||$235|
|HVAC / Mechanical / Cooling||$125||$215|
|Subtotal – Data Center Improvements||$520||$900|
|Total Development Costs||$625||$1,135|
In terms of the powered shell, land costs range between $25 to $75 per gross sqft, while the building shell costs between $80 to $160 per gross sqft. As such, the total powered shell costs range between $105 to $235 per gross sqft, equivalent to 17% to 21% of total development costs.
Data Center Improvements
Data center improvements then bring this powered shell up to a turn-key (i.e., fully fitted-out) facility. This means that the data center is ready to house cages, cabinets, and racks with power distribution units (PDUs), uninterruptible power supplies (UPS), HVAC systems, and fire suppression capabilities in-place.
Electrical systems comprise the largest component of data center improvements, with costs ranging between $280 to $460 per gross sqft. Next, mechanical systems, which is primarily HVAC (heating, ventilation, and air conditioning), add further costs of $125 to $215 per gross sqft. A smaller cost component, fire suppression, involves an additional $15 to $25 per gross sqft. Finally, building fit-out makes up the remaining $100 to $200 per gross sqft of data center improvement costs.
Collectively, total data center improvements range between $520 to $900 per gross sqft, equivalent to 79% to 83% of total development costs. Within data center improvements, the two largest categories are electrical systems, comprising 40% to 45% of total development costs and HVAC / mechanical / cooling at ~20% of total costs.
Total Development Costs
Overall, including both powered shell and data center improvements, total development costs range between $625 to $1,135 per gross sqft.
Alternatively, total development costs could be measured on the basis of net rentable square feet (NRSF), which accounts for power and cooling capacity limitations and excludes space occupied by infrastructure and equipment. Assuming NRSF is equal to ~50% of gross square feet, then total development costs would range between $1,250 to $2,200 per NRSF.
Total development costs for a greenfield data center, based on megawatts, typically range from $7m to $12m per megawatt of commissioned IT load.
However, the cost per megawatt to build a data center can vary, based on factors related to the sophistication of the data center fit-out. To this end, the data center requirements of hyperscalers – such as cloud service providers (CSPs) and internet companies – vary greatly from enterprises.
Below are four key areas where customer requirements differ, impacting build costs:
- Power Density: amount of power available in a fixed amount of space. High-density space refers to a large amount of power relative to space, while low-density space signifies a smaller amount of power relative to space. For customers desiring high-density space, additional cooling capacity is needed to match increases in IT equipment power requirements and heat exhaustion – which leads to higher costs
- Redundancy/Resiliency: to mitigate downtime, data centers build redundancy into their facilities, which duplicates critical components such as backup generators, uninterruptible power supplies (UPS), power distribution units (PDUs), and cooling systems. As the level of redundancy architecture increases, known as N, N+1, N+2, 2N, and 2N+1, a corresponding rise in the cost of building a data center results
- Scale: from both a facility-level and corporate perspective, large-scale data center developments and portfolios allow for greater purchasing power and thus more cost-effective procurement of electrical systems and HVAC components from manufacturers like Schneider Electric, Eaton, and Vertiv. This leads to lower unit costs for data center construction projects
- Timing: relates to the time that it takes to construct a phase of a data center and make it operational for a customer’s occupation. Customers often need data center space within very specific and short timeframes, which can be more costly to build. Whereas data centers built on-speculation (i.e., without a customer pre-commitment) can be fitted-out over time, potentially yielding cost savings
Tier Certification Levels
Data centers are commonly rated by the Uptime Institute through four distinct tier certification levels: Tier I, Tier II, Tier III, and Tier IV. This rating system has strict and specific requirements for the capabilities and minimum level of service a data center certified for each ‘tier’ provides – with the level of redundant components being a major factor.
By requiring greater redundancy to achieve higher tier certification, the costs of fitting-out a data center rise as a project targets a higher tier certification level. For example, the cost of constructing and fitting-out a Tier IV data center can be 25% to 40% more than a Tier III data center and double that of a Tier II data center.
Beyond greenfield data centers, a meaningful cost advantage can also be gained through brownfield redevelopment projects. For example, QTS Realty Trust (now owned by Blackstone) has repurposed many existing real estate assets, such as semiconductor fabrication plants and newspaper printing presses, into data centers.
Previously, QTS has noted a 10% to 15% cost advantage from its brownfield redevelopment of existing buildings, translating into cost savings of several million dollars per megawatt. Specifically, QTS’ brownfield redevelopment approach resulted in an average cost to build of $7m to $8m per megawatt.
Types of Facilities – Data Center Build Costs
Data center build costs are influenced by the type of facility being constructed, whether it be retail colocation, wholesale, or on-premises. Still, all of these data center types, whether serving retail or wholesale customers, require the same fundamental electrical and HVAC systems to power and cool the equipment in their facilities.
While no two data centers are identical, Dgtl Infra provides examples of portfolio and asset-level data center construction costs for retail colocation, wholesale, and on-premises facilities. Particularly, these figures are based on capital expenditure disclosures from data center operators for their new and/or expansion sites.
Retail colocation involves the provision of turn-key data center services to multiple customers with smaller individual power capacity requirements, typically under 1 megawatt, and within the same data halls. These retail data centers tend to cost towards the high-end of build cost ranges, on a per sqft and per megawatt basis, as they need to be capable of accommodating multiple types of customer deployments.
CoreSite – Example
American Tower (which recently acquired CoreSite) has a data center development pipeline totaling $325.9m, with 20 megawatts of power capacity and 148k sqft under construction. In turn, this retail and interconnection-focused data center construction pipeline implies a cost to build of $16.3m per megawatt and $2,200 per sqft.
Notably, CoreSite’s data center development pipeline is entirely in the United States and skewed towards markets where construction is more expensive, including Silicon Valley (Santa Clara), Los Angeles, and New York.
Wholesale data centers are leased to a single customer, in the form of either a full building or data hall, with access to basic power and cooling infrastructure. In these facilities, the customer is responsible for building-out the white space into a fully functioning data center.
Implicitly, a data center built for a single tenant, or for a few customers with similar requirements, can be developed with standardized designs and materials, driving construction efficiencies. Additionally, as previously noted, large-scale data center development projects allow for greater purchasing power and thus, more cost-effective procurement of data center components, leading to lower unit costs.
Overall, wholesale data centers can be built for a lower cost, on a per sqft and per megawatt basis, than multi-tenant retail colocation facilities.
Digital Realty – Example
Digital Realty’s turn-key data center development pipeline comprises $3.86bn, with 321 megawatts of power capacity and 3.68 million sqft under construction. In turn, this global and primarily wholesale data center construction pipeline implies a cost to build of $12.0m per megawatt and $1,050 per sqft.
Equinix (xScale) – Example
Equinix has 9 ongoing xScale (hyperscale) data center builds in the Americas, EMEA, and Asia-Pacific. In aggregate, these projects total $952m of costs and represent 83 megawatts of power capacity. In turn, Equinix’s multi-region wholesale data center development pipeline implies a cost to build of $11.5m per megawatt.
On-Premises Data Centers
On-premises data centers are owned and operated by end users, including corporations and organizations, to meet their own data center requirements. For example, cloud service providers (CSPs), including Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, as well as internet companies like Apple and Facebook (Meta Platforms), often pursue self-builds of some of their data centers, instead of leasing all of their capacity needs from third-party wholesale facilities.
As such, on-premises data centers provide another relevant benchmark to assess data center build costs. To this end, below are three examples of on-premises data centers in the United States from Apple and Facebook (Meta Platforms), which were announced in 2022:
Apple and Facebook (Meta Platforms) – Examples
- Apple: new data center campus in Waukee, Iowa will ultimately span 6 buildings, totaling 2 million sqft and will represent an investment of $1.3bn, inferring a cost to build of $650 per sqft
- Facebook (Meta): new data center campus in the city of Kuna, Idaho will span 960k+ sqft and will represent an investment of $800m+, implying a cost to build of $833 per sqft
- Facebook (Meta): new data center campus in Kansas City, Missouri will span nearly 1 million sqft and will represent an investment of $800m+, indicating a cost to build of $800 per sqft
Geographic Comparison – Data Center Build Costs
Data center build costs show limited geographic variance, given that land only comprises ~5% of total development costs, with labor rates another small contributor. Below, Dgtl Infra provides examples, from Digital Realty and Equinix, of portfolio and asset-level data center construction costs for key regions globally.
In the United States, Digital Realty’s development pipeline implies an average cost to build of ~$9.5m per megawatt and ~$1,000 per sqft.
Regionally, Tier-1 markets including Silicon Valley (Santa Clara, San Jose, San Francisco) and the New York / New Jersey metro area have more expensive land values. In contrast, Dallas-Fort Worth and Atlanta tend to have larger wholesale data centers built in their outer suburbs, which makes land values and build costs more economical.
In Europe, Digital Realty’s development pipeline implies an average cost to build of ~$14m per megawatt and ~$1,200 per sqft. Within Europe, markets such as Frankfurt, Germany; London, UK; Paris, France; and Zurich, Switzerland; tend to have more expensive cost to build metrics than Madrid, Spain; Dublin, Ireland; and Amsterdam, Netherlands.
In Asia-Pacific, Digital Realty’s development pipeline implies an average cost to build of ~$12m per megawatt and ~$1,000 per sqft. Particularly, key Asia-Pacific data center markets that are more expensive, include Tokyo, Japan; Osaka, Japan; Seoul, South Korea; Singapore; Hong Kong; Sydney, Australia; Mumbai, India; Beijing, China; and Shanghai, China.
However, proximate alternatives to markets like Singapore, in the form of Johor, Malaysia; and Batam, Indonesia; provide lower-cost nearshore alternatives. At the same time, the main wholesale data center hubs within these countries – Kuala Lumpur (Cyberjaya), Malaysia and Jakarta (Bekasi), Indonesia – are also less expensive.
In Latin America, the four major data center markets are São Paulo, Brazil; Querétaro (Mexico City), Mexico; Santiago, Chile; and Bogotá, Colombia.
In Querétaro, Equinix, via its xScale (hyperscale) joint venture, is building the first phase of its MX3 data center, known as Mexico City 3x-1, at a cost of $58m. This facility will have 4 megawatts of power capacity, implying a build cost of $14.5m per megawatt, when its first phase opens in Q3 2022.
Yet, through subsequent phases, Equinix expects to scale MX3 to 14 megawatts of power capacity, at a total cost of $140m, which indicates a build cost of only $10m per megawatt. Indeed, Equinix’s example shows how initial phases of data center projects can have a higher capital intensity, while subsequent phases of construction can help bring relative costs back in-line with industry averages.