The UK’s data centre market has the potential to double by 2028 amid the rush to provide facilities for artificial intelligence and cloud computing. There’s a real opportunity for existing and new market entrants to see strong returns on their investments in the sector, said Jonathan Wilson, partner at Gardiner & Theobald.
However, they need the right support to create the best strategy and overcome challenges.
“The huge level of demand for data centres is causing real challenges for developers — the UK has limited resources to meet it,” he said. “However, rather than challenges being a red flag, developers can achieve real business growth if they know how to mitigate them.”
G&T has been supporting developers of data centres since 2000. In the last five years, we've significantly ramped up the cost and project management and advisory services to support the rapid growth in demand.
The first major barrier to entry in data centre construction is the lack of power, said Adam Thurley, partner at Gardiner & Theobald.
The UK has significant power constraints, particularly around cities and towns where there is already a high concentration of data centres and a multitude of competing demands. Not only are AI chips increasing in power consumption as they work faster, but they have an increased demand for cooling.
“In London, we’re working with a client who has an opportunity to increase a data centre capacity but they cannot get power for three or four years,” Thurley said. “By that point, they won’t know if even that will be enough power for higher density centres.”
Cost inflation also continues to be a growing challenge, Wilson said. Mechanical and engineering is a huge component of the capital cost of constructing a data centre, an area that has seen hyperinflation in the last few years.
Rising costs are exacerbated by a lack of resources, Thurley said. It can take up to two years to source critical equipment such as transformers.
A third challenge is the need to decarbonise the industry, he said. Decarbonisation is a challenge for the wider construction sector, while new regulations and environmental, social and corporate governance commitments are shaping investment decisions.
To help mitigate challenges, G&T's data centre team offers a range of solutions, Wilson said. As well as strategic site selection and feasibility studies, the team works with clients to create cost control and risk mitigation strategies that can cope with a volatile market.
When it comes to design support, the team focuses on helping clients create a project plan that reduces construction challenges and meets the future needs of data centres, Thurley said. At the moment, many developers don’t fully understand what product they need to deliver to capture the market.
“Some clients are using best practice guides and legacy design plans that aren’t moving with the times,” he said. “The market is moving so fast that developers need to build in a lot of flexibility to accommodate different types of tenants. This includes options to put in high-density equipment.”
However, the most successful data centres are finding opportunities to innovate, Wilson said. They're looking at ideas for urban areas such as high-rise data centres and jumping on solutions to reduce water usage and energy consumption and free cooling.
“We identify new technologies and bring them to clients,” he said. “Our role is to actively challenge design teams to stop simply repeating what has been done before and see if there’s an alternative, better way to do things that gets the best value for clients, not just during the build but for the whole property life cycle.”
Innovations during development could include modern methods of construction, Thurley said. There’s an opportunity to reduce costs by standardising and modularising projects to make them as repetitive as possible.
G&t works with clients to find ways to optimise value on their projects. One client asked the team for help with a design for a data centre that didn’t work commercially because it included abnormally large generators that came with a premium cost. The team challenged the design teams, who instead opted for 10 standard-sized generators that opened up the market to more suppliers and drove down costs.
Technology and design solutions aside, G&T is encouraging clients to consider new ways of working, such as hybrid procurement models. Rather than appointing one contractor for the entire project, they split work into smaller packages, using specialist contractors for each element.
“This means we can derisk the project by illuminating key risks earlier,” Thurley said. “We’ve seen the benefits of this approach in other sectors, such as the ability to phase work. Additionally, this strategy addresses contractor shortages by opening the door to other businesses who might not specialise in complete data centre builds.”
To help clients maximise opportunities even further, G&T connects clients with suppliers and design teams using its wide industry network, Wilson said. The dedicated data centre team includes specialist cost managers, planners and engineering-led project managers.
It takes the work of all these people to support data centre construction to continue to drive industry growth, Wilson said.
“Growth in demand isn’t going to slow any time soon, neither will the need to innovate to cope with challenges,” he said. “The next stage of data centre growth will potentially look at the best way to deliver a higher density facility. Our goal is to strengthen partnerships across the industry to drive innovation and best practice.”
This article was produced in collaboration between Gardiner & Theobald and Studio B and was first published by Bisnow on their website.
